Bernard Arnault's luxury fashion group LVMH led rival stocks lower on Wednesday after reporting disappointing sales due to weak demand in China.
LVMH's fashion and leather goods division, which includes iconic brands such as Louis Vuitton and Dior, saw sales fall 5%, well below expectations for 4% growth. The sector's sales declined for the first time since 2020.
The company reported a 3% organic sales decline, excluding currency, acquisitions and divestitures, which was lower than expected organic growth of 2%.
Shares in the world's largest luxury goods group fell as much as 7.5% on Wednesday morning to a two-year low, but rose again in the afternoon.
High-end competitors followed suit. On Wednesday afternoon, L'Oréal shares were down 1.59% and Hermès shares were down 0.53%.
Flavio Cereda, co-manager of GAM's luxury brands investment strategy, a fund that owns shares in luxury goods stocks, said: “LVMH is a proxy for many sectors and this article inevitably leads to increased volatility in the short term. “It will cause this,” he said. told Reuters.
Founder and CEO Bernard Arnault, who just 18 months ago was the world's richest person, lost $7.3 billion as the company's stock plummeted, according to Forbes magazine. It is said that
According to Forbes magazine, Mr. Arnault is the fifth richest person in the world with a net worth of $166.7 billion.
The region that includes China was LVMH's worst performer as Chinese consumers continued to refrain from purchasing luxury goods.
The company's U.S. division did not perform as well, with slow growth and widespread problems for LVMH.
LVMH executives provided little reassurance to investors, further fanning the flames of the selloff.
LVMH Chief Financial Officer Jean-Jacques Guiony said Tuesday when asked about the company's outlook: “I don't know.”
“The visibility of our business is as good as yesterday's sales. We've been through ups and downs,” Guiony said. “The only thing we know is that when business goes bad, it usually gets better afterwards. It's a cyclical business.”
Organic sales for the company's division, which includes China, fell 16%, a bigger drop than expected. The region's quarterly results were negative for the third time in a row.
Chinese consumers are slashing spending, citing a weak real estate market and an uncertain employment outlook.
Chinese authorities launched a stimulus package last month to boost spending, but consumer sentiment remains weak.
“Consumer confidence in mainland China today is back to its lowest level ever recorded during the coronavirus pandemic,” Guiony said.
It's difficult to assess how effective the stimulus measures are, but “this shows they're taking this issue very seriously,” Guiony said.
Citigroup said in a note that it sees no signs that the Chinese government's efforts will change consumer behavior, based on insights into activity at upscale malls in eastern China during Golden Week.
Citigroup said mall sales fell in the low teens as middle-class consumers hit by falling real estate prices in China put the brakes on luxury purchases.
Meanwhile, former President Donald Trump has vowed to enact high tariffs in China that could burden Hennessy, the LVMH-owned cognac maker, if re-elected.
