LVMH sales growth slowed in the Q2 as Chinese shoppers reined in spending on high-end fashion at home, even as demand in Western markets slightly picked up. French luxury group LVMH Q2 sales of handbags and champagne weakened as shoppers reined in spending, missing expectations as demand for high-end goods fades.
LVMH, the world’s largest luxury goods company, posted a modest 1% rise in organic sales in the Q2 Falling short of analyst expectations and fueling concerns over decelerating growth in the sector.
LVMH Q2 sales and earnings report
Sales at the world’s biggest luxury group and owner of labels Louis Vuitton, Tiffany & Co. and Hennessy, grew to 20.98 billion euros ($22.8 billion), a 1% rise on an organic basis, which strips out currency effects and acquisitions.
LVMH Q2 performance compares to a 3% rise year-on-year in the Q1, and double-digit growth in 2023 when consumers in key market China splurged on luxury goods as they emerged from pandemic lockdowns.
Drop in luxury sector sales
The report from sector bellwether LVMH, which is Europe’s second-largest listed company, worth around 340 billion euros, follows profit warnings from smaller labels Burberry and Hugo Boss Last week.
Gucci-owner Kering reports first half results on Wednesday and Hermes reports on Thursday.
Though LVMH sales undershot expectations for revenues of 21.6 billion euros, according to an LSEG poll based on six analysts, it was seen as largely priced in.
“All in all, this shouldn’t be an insurmountable problem, given the minimal size of the miss and the significant pullback the LVMH share price has suffered since the initial post 4Q23 reporting euphoria,” said Luca Solca, analyst at Bernstein.
LVMH Q2 sales fall in Asia
LVMH offered “no nasty surprises”, said Piral Dadhania, RBC analyst.
Its sales in Asia, excluding the Japanese market, fell by 14% in the Q2, worsening from a 6% drop in the first quarter.
Sales in Japan, where tourists are taking advantage of the weak yen, continued to grow.
LVMH CFO Jean-Jacques Guiony said that it was difficult to provide an outlook on the Chinese market, but added that “the Chinese customer is holding up quite well”.
“We still see a lot of China travellers, particularly into Japan, which says something about the appetite of mainlanders for our brands, which shows no sign of fading away,” Guiony told analysts on a call.
Business with U.S. and European customers is “slightly better”, he added.
The surge in sales in Japan is, however, exerting significant pressure on margins, he added, with lower costs and prices compared to China.
LVMH operational profit
Operating profit for the first half was 10.65 billion euros, with an operating margin of 25.6%, down from 27.4% a year ago.
That compared to expectations for 11.11 billion euros and a 26.2% margin, according to consensus provider Visible Alpha.
The group’s fashion and leather goods division, which includes the Louis Vuitton and Christian Dior brands and accounts for nearly half of group sales and the bulk of operating profit, grew 1%, slowing slightly from the previous quarter’s 2% rise.
LVMH share price
LVMH share price have been volatile since the luxury slowdown emerged, and are down about 20% over the past year, amid worries that middle-class shoppers in China are pulling back on purchases due to a property slump and job insecurity.
