LVMH fashion sales slump as luxury faces decline in global demand

LVMH, the world’s largest luxury group, has reported a steep downturn in its core fashion and leather goods division, providing a fresh signal that even affluent consumers are scaling back spending as global uncertainty persists. The division, which houses iconic brands such as Louis Vuitton, Dior, and Givenchy, endured a 9 per cent fall in organic sales over the past quarter to 9 billion euros—a marked acceleration from the 5 per cent decline seen in the previous three months.

This performance underscored the sharpest decrease among LVMH’s various business units, which encompass wines, spirits, watches, and jewellery. The first half of the year saw this division’s sales drop by 7 per cent on an organic basis to 20.7 billion euros, with profits from recurring operations falling by 18 per cent to 6.6 billion euros. The company attributed part of this decline to challenging comparatives, noting that tourist spending during the first half of 2024, especially in Japan, had provided an earlier boost now absent.

Across the whole group, sales contracted by 4 per cent on an organic basis in the second quarter, standing at 19.5 billion euros. This was broadly in line with analysts’ projections. For the first half, group sales were down by 3 per cent to 39.8 billion euros and operating income before non-recurring items slid to 9 billion euros, from 10.65 billion a year ago.

The wine and spirits division, home to renowned names such as Moët and Hennessy, also faced headwinds. Revenue in the segment slipped 4 per cent over the quarter, with a 7 per cent decline for the half-year as trade tensions impacted customers in vital markets including the United States and China. Demand for cognac remained weak, although champagne trends showed signs of recovery in recent months.

LVMH has been hit on multiple fronts this year as economic slowdowns in both the US and China—exacerbated by issues such as a continuing property crisis—have eroded consumer sentiment. The group’s Swiss rival Richemont has likewise encountered difficulty, though jewellery demand has helped offset weaker sales elsewhere. LVMH’s jewellery business recorded flat sales for the quarter.

Chief financial officer Cécile Cabanis remarked that macroeconomic conditions remain highly uncertain but voiced cautious confidence for the remainder of the year, citing ongoing trade talks between the European Union and the United States as a potential positive catalyst. Addressing the impact of possible tariffs on US-bound exports, Cabanis noted that most of LVMH’s brands retain significant pricing power, except for wines and spirits. The group announced ambitions to open a manufacturing facility in Texas by 2027 to counter anticipated tariff pressures. Highlighting the company’s commitment to profitability, Cabanis stated that LVMH is prepared to divest non-performing brands, as seen with recent sales of stakes in Off-White and Stella McCartney. Shares in LVMH have now dropped 28 per cent over the past year, closing 2 per cent down at 470.25 euros.