LVMH misses expectations in the third quarter as China's weakness persists

LVMH, the world’s largest luxury brand, reported its worst quarterly performance since 2020 during the three months leading up to September, resulting in a 10% drop in its American Depositary Receipts (ADR) shares on US markets on Tuesday. According to its press release, the Paris-based conglomerate's third-quarter organic sales fell by 3% year-on-year, marking the first decline since the pandemic, driven by weakened demand in China and Japan.

During the earnings conference call, chief financial officer Jean-Jacques Guiony remarked: “Consumer confidence in mainland China today is back in line with the all-time low reached during Covid.” The strengthened Japanese yen has also impacted consumer demand in Japan, which remains one of the group's primary markets.

Additionally, LVMH may pay additional corporate tax of between €700 million and €800 million next year under the new prime minister’s policy to raise levies on France’s biggest companies, according to chief financial officer Jean-Jacques Guiony on an analyst call.

Europe’s second-largest company reported revenue of €19.08 billion in the third quarter, down from €19.964 billion during the same period last year, and a significant 10% decline from €21.206 billion in the second quarter. Analysts from Barclays had expected 2% revenue growth for the third quarter.

By category, the largest segment, the Fashion & Leather Goods business group—home to brands such as Louis Vuitton and Dior—generated revenue of €9.151 billion, representing a 5% decline from the previous year. Wines & Spirits continued to experience a sharp downturn, declining by 7% year-on-year, following a 12% and 5% drop in the first and second quarters, respectively.

Notably, sales in Japan showed signs of