LVMH Sales Slump Amid Rising Prices and Chinese Market Woes

LVMH, the world's largest luxury goods group, saw a slowdown in sales growth in Q2 due to price increases and weak consumer spending, particularly in China. The company's revenue grew by just 1% on an organic basis, missing analyst expectations. This is contributing to concerns over the luxury sector's overall growth.

In an unsettling turn for the luxury goods market, LVMH—the globe's premier luxury conglomerate—recorded a slowdown in sales for the second quarter. Deterring shoppers, especially within China's crucial market, rising prices have muted the company's sales growth to just 1% on an organic basis, missing analyst expectations of 21.6 billion euros, according to an LSEG poll.

The subdued growth comes as profit warnings from labels like Burberry and Hugo Boss spotlight a pullback among middle-class Chinese consumers, spurred by a shaky property market and job insecurity. LVMH's sales in Asian markets, excluding Japan, fell 14% in Q2, worsening from a 6% decrease in Q1. However, Japan remains a bright spot with solid growth driven by a weak yen.

Operating profits mirrored the slowdown, reporting 10.65 billion euros with a margin dip to 25.6%, underperforming expectations. Despite these setbacks, Luca Solca of Bernstein highlights this as a manageable issue given the minor miss and recent share price fluctuations. The fashion and leather goods division, including marquee brands like Louis Vuitton and Christian Dior, slowed to a 1% growth rate, hinting at broader industry challenges.

(With inputs from agencies.)