LVMH Suffers Sluggish Sales Of High-end Fashion And Handbags

Sales at LVMH's key fashion unit fell over the holiday season as Louis Vuitton's owner continued to suffer from sluggish demand, setting back hopes of a wider luxury rebound.

Organic sales at the fashion and leather goods division declined 3% in the fourth quarter, LVMH Moët Hennessy Louis Vuitton SE said in a statement on Tuesday. Analysts had expected a slightly smaller drop.

LVMH shares slumped as much as 6.2% in early trading on Wednesday in Paris, the most since April on an intraday basis. They were down about 21% over the past 12 months through Tuesday's close.

Luxury companies have struggled to bounce back from a slump that followed a post-pandemic boom, with cost-of-living pressures and geopolitical uncertainty weighing on spending. Brands have also suffered from a consumer backlash after steep price increases.

Chief executive officer Bernard Arnault told investors 2026 is unlikely to be straightforward, and that LVMH would limit spending this year as a result.

"The journey back to growth for the sector, and LVMH as its proxy, will remain bumpy in the coming quarters, highly dependent on the external backdrop," JPMorgan analyst Chiara Battistini said in a note.

Some companies have been more resilient, such as Cartier owner Richemont. In uncertain times, consumers see gold necklaces, bracelets and the like as better stores of value than trendy handbags.

Though LVMH has a smaller presence in watches and jewellery, that business performed better than expected in the latest quarter, helping the company eke out a slight gain in overall sales despite weakness in fashion and leather goods. Bulgari performed particularly strongly during the fourth quarter, LVMH said.

That was an outlier for LVMH, which otherwise did not enjoy a festive rebound, AIR Capital analyst Pierre-Olivier Essig told Bloomberg. The cautious management tone likely indicates a year of transition, he said.

LVMH paid €1 billion (US$1.2 billion or RM4.7 billion) to increase its stake in Loro Piana — the brand known for its cashmere sweaters — to 94% from 85% in the second half of last year, according to an LVMH representative.

Organic sales rose 1% in the fourth quarter in both the US and the region that includes China, ahead of analyst estimates. Drops of 2% in Europe and 5% in Japan were bigger than expected.

Full-year profit from recurring operations was €17.8 billion, LVMH said, a drop of 9.3% from a year earlier but better than analysts expected.

LVMH's wines and spirits division saw its third year of falling sales. It's weighed down in particular by a collapse in demand for Hennessy Cognac.

Arnault, the billionaire founder of LVMH, said his family's stake in the luxury conglomerate would surpass 50% in 2026.

Source: Theedgemarkets