Editor’s Note
This article highlights a notable shift in the luxury market, with LVMH’s core fashion and leather goods division experiencing a sales decline. It underscores the broader trend of cooling global demand affecting even the industry’s most resilient players.
Sales in the fashion and leather goods division of LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury group, have declined due to a global slowdown in luxury consumption.
According to Bloomberg on the 27th (local time), LVMH revealed that its fashion and leather goods sales for the fourth quarter of last year decreased by 3% compared to the same period the previous year. This figure slightly missed market expectations (a decline of 2.94%), indicating that the demand recovery was limited even during the year-end holiday shopping season. Meanwhile, the group’s total fourth-quarter revenue reached 22.7 billion euros, exceeding the market expectation of 22.2 billion euros compiled by financial information company London Stock Exchange Group (LSEG).
By region, fourth-quarter sales in Europe and Japan decreased by 2% and 5% respectively, performing worse than expected. In contrast, sales in the United States and parts of Asia, including China, increased by 1% each, surpassing market expectations.
Full-year operating profit was 17.8 billion euros, a 9.3% decrease year-on-year, but still exceeded market forecasts.
However, not all divisions performed poorly. The watches and jewelry business showed relative resilience. Notably, Bulgari reported better-than-expected performance in the fourth quarter, contributing to a slight overall increase in the group’s revenue.
This is seen as a result of consumers, in an uncertain environment, preferring jewelry like gold necklaces and bracelets, which have characteristics of tangible assets, over trendy handbags. Bloomberg analyzed that the relatively solid performance of competitors like Cartier, under Compagnie Financière Richemont (Richemont), in the jewelry segment is in the same context.
The downturn in core businesses like fashion and leather goods is attributed to a cooling off in the post-pandemic surge in luxury demand. Factors such as increased cost-of-living burdens due to high inflation, geopolitical uncertainties, and consumer pushback against years of aggressive price hikes have combined to dampen demand for expensive bags and fashion items.
Consequently, LVMH indicated it will adopt a more cautious stance regarding investment and expenditure this year compared to before.
