LVMH fashion and leather sales slide in Q3, dashing sector hopes

LVMH Reports Q3 Drop in Fashion and Leather Sales, China Demand Weakens Further

Luxury Sector Faces Challenges Amid Weakening Chinese Demand

By Tassilo Hummel and Alessandro Parodi

LVMH’s Q3 Results and Market Impact

PARIS, Oct 12 (Reuters) - Luxury bellwether LVMH on Monday reported worse-than-expected third-quarter organic sales growth as demand for its fashion and leather brands, including Louis Vuitton and Dior, deteriorated due to weak Chinese demand.

The trading update from the world's largest luxury group, and the first major sector player to report third-quarter results, is likely to heighten concerns that the $350 billion luxury industry, mired in a three-year slowdown, will struggle to regain momentum.

Organic Sales Performance

Organic sales, which strip out currency swings, rose 1% from a year earlier to €18.5 billion ($20.7 billion), missing analysts' expectations for growth of 1.3%, according to a Visible Alpha consensus.

Fashion and Leather Goods Division

The fashion and leather goods division, which generates nearly half of group revenue, posted a 5% fall in organic sales, against an expected 1.8% decline.

Market Value and Regional Sales

Europe's leading luxury groups have lost around €330 billion in market value since the start of the year, with LVMH alone shedding roughly 40%.

Sales in Asia, dominated by China, fell 5% from a year earlier, while sales in the US rose 5%.

Factors Behind Weakening Demand

Chinese Consumer Sentiment

"In the third quarter specifically, Asia was penalised by a sharp macro-led deterioration in Chinese consumer sentiment, with a tangible impact on discretionary expenses," Chief Financial Officer Cecile Cabanis told analysts.

Tax Crackdown and Geopolitical Concerns

China's tax crackdown on wealthy individuals has become the latest headache for luxury brands, which are already grappling with the fallout from the Iran war and signs of slowing consumer spending in the US.

Brand-Specific Challenges

Louis Vuitton’s Position and Controversy

LVMH's fashion and leather division is dominated by Louis Vuitton, by far the group's largest brand. The label has faced a backlash in China over a copyright dispute with tea chain Molly Tea, which used a logo resembling the floral motif used on Louis Vuitton's signature monogram handbags. The dispute drew criticism on social media.

Market Reaction

LVMH's US-listed shares fell nearly 3% after the trading update was published.

($1 = 0.8960 euros)

(reporting by Tassilo Hummel. Editing by Dominique Patton and Mark Potter)