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On Tuesday, LVMH reported that its fashion and leather goods division grew 9 per cent to €9.75 billion in sales in the third quarter, while group sales were also up 9 per cent (to €19.96 billion).
Growth is slowing for the fashion group compared to the first half of the year, when the division’s sales were up 18 per cent in Q1 and 21 per cent in Q2. Tougher comps — this quarter last year saw a big rebound in China, plus strong sales in Europe and the US — played a role, Bernstein analyst Luca Solca said in a note. Now, North American sales growth has faltered and Asia and Europe growth is slowing as well.
“This seems a sign of continuing moderation, as consumers sober up after the post-pandemic euphoria,” Solca wrote. Most luxury stocks, including LVMH, Kering and Richemont, have decreased in the double digits since July. In after-hours trading on Tuesday, LVMH stock had fallen 1.5 per cent.
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The boom times for high luxury, it seems, are coming to an end. “Growth is converging — after three roaring and outstanding years — towards numbers that are more in line with the historical average,” LVMH CFO Jean-Jacques Guiony told analysts. “Will we stay there? I don’t know. There is no reason to believe that we will crash, nor that we will come back to the type of 20 per cent growth that we enjoyed for a period of time.”
By region, Asia (excluding Japan) and Europe sales were up 11 per cent and 7 per cent, respectively, modest gains compared to 34 per cent and 19 per cent increases in Q2. Japan was up 30 per cent year-on-year, while the US returned to positive territory, up 2 per cent.
Pressed to comment on the momentum of individual brands, Guiony said that Louis Vuitton and Dior are close to the fashion and leather goods division’s average growth rate of 9 per cent, while Celine, Loewe, Loro Piana and Marc Jacobs are outperforming the average.
Asked about Dior’s growth specifically, Guiony said: “You can’t grow a business 30 per cent per annum forever. So the business has to consolidate. We cannot open that many stores, otherwise, we would end up over-distributing the brand. So we also have to figure out what is the exact size of the distribution system and how we want to express the brands in terms of category. This should generate healthy growth going forward…So this is where we are. I think the slowing down in the growth is absolutely normal after these fabulous and outstanding years that we’ve been through. And we’ll continue to deliver value out of it going forward, believe me.”
Looking ahead to the fourth quarter, Guiony noted that the comparison base in Asia will be easier than in Q3, and to some extent in the US as well. “So it will help, but but there are so many dynamics at play when it comes to putting together the numbers for the most important in the year, which is Q4 that I would not dare anticipating anything above that.”
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