[PARIS] LVMH sales fell more than expected in the first quarter, weighed down by weak demand for luxury goods in China and the US and the threat of a trade war.
Revenue at the French luxury group’s fashion and leather goods division, its largest unit, dropped 5 per cent on an organic basis, LVMH Moet Hennessy Louis Vuitton said on Monday (Apr 14). Analysts had expected a decline of 0.55 per cent.
“Investor concerns around underlying demand recovery are likely to be amplified based on these results,” RBC analysts led by Piral Dadhania said in a note.
LVMH’s American depositary receipts slid as much as 9.4 per cent in New York.
Louis Vuitton owner LVMH is the first European luxury group to release its first-quarter results. Headed by billionaire Bernard Arnault, the company is considered a bellwether for the industry because it sells a wide range of high-end goods, from Christian Dior jackets to Tiffany engagement rings, Tag Heuer watches and Dom Perignon Champagne.
The luxury market has been struggling to emerge from a period of sluggish growth caused in part by Chinese shoppers reining in costly purchases. The industry’s outlook has grown even gloomier since US President Donald Trump this month placed 10 per cent tariffs on imports from the European Union, while pausing plans for a 20 per cent levy for 90 days.
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The tariff reprieve has put the group in “unknown territory”, chief financial officer Cecile Cabanis said on a conference call after the results. LVMH will consider price increases to help offset the impact of the tariffs, and also has room to adjust marketing costs, she added. While it could expand output capacity for Louis Vuitton and Tiffany in the US, it does not plan to radically change its US production, she said.
The trade turmoil has sent European shares tumbling in recent weeks, dragging LVMH down some 30 per cent from the highs it reached in January.
The US, which accounted for 24 per cent of LVMH’s sales in the quarter, fell by 3 per cent, missing expectations for a small gain. The region that includes China fared worse, with sales there sliding 11 per cent, more than double estimates. Only Europe showed growth.
All units saw sales decline except watches and jewelry, which was flat. Wines and spirits posted the biggest decline, 9 per cent. Former CFO Jean-Jacques Guiony moved in February to oversee the struggling division, which is suffering from tariffs imposed by China on its Hennessy Cognac.
Cabanis also acknowledged that the recent tariff changes in the US might have further weighed on Cognac demand there.
Later this week, Moncler, the maker of expensive ski jackets, and Birkin-bag maker Hermes International will report sales, while LVMH’s Arnault is expected to speak at the annual shareholders’ meeting on Thursday. BLOOMBERG
