The luxury retail market continues to face significant challenges, as highlighted by LVMH’s most recent performance.
Alice Price, Associate Apparel Analyst at GlobalData, shares her insights on the luxury giant’s ongoing difficulties, which underscore the broader struggles within the sector.
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LVMH’s declining revenue points to the deep-rooted issues plaguing the luxury industry globally.
Revenue decline and market uncertainty
LVMH’s group revenue saw a sharp decline of 4.4% in the third quarter of FY2024, dropping to €19.1 billion. This marks a significant downturn from the previous quarter, where the decline stood at 1.1%.
Alice Price notes, “LVMH’s performance continued to dwindle in Q3 FY2024, leading revenue for the nine months to September 2024 to drop by 3.5% to €60.8 billion.”
This downward trend has raised concerns about the overall health of the luxury market, with no clear signs of recovery in the near future.
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By GlobalDataPrice stresses that LVMH’s latest results are a reflection of broader market conditions: “As a luxury bellwether, LVMH’s latest results spell further uncertainty and disappointment for the luxury sector.”
The global slowdown in consumer spending, especially within the luxury segment, has only added to the challenges faced by high-end retailers.
Japan’s outperformance and global market slowdown
Despite LVMH’s global struggles, Japan remained a standout performer. The region saw organic growth of 20% in Q3 FY2024, although this marked a slowdown from the 36% growth in the first half of the year.
Price explains, “While Japan continued its outperformance, demand moderated compared to the first half of the year.”
The strengthening Japanese yen played a role in reducing the appeal of luxury goods for Chinese shoppers, who had previously taken advantage of favourable pricing in the region.
In contrast, other key markets saw muted growth or outright declines.
In Europe, revenue grew by just 2%, despite the much-anticipated boost from the Paris 2024 Olympic and Paralympic Games.
In the United States, LVMH’s performance was stagnant, as Price points out: “Performance in the US was muted, with revenue remaining flat, as consumer uncertainty surrounding the upcoming election dampened its performance.”
Meanwhile, Asia, excluding Japan, proved to be a significant challenge, with revenue plummeting 16%, largely due to China’s slowing economy.
However, there is cautious optimism for a rebound in China, as Price notes: “Stimulus payments introduced by the Chinese government in September 2024 bring hope for an improvement in the final quarter.”
Division-specific challenges and aspirational shoppers’ changing habits
LVMH’s divisions are also facing distinct struggles. Its Selective Retailing division, which includes brands like Sephora, saw a revenue decline of 3.7% in Q3 FY2024.
Price points out that “despite Sephora experiencing strong demand across North America, Europe, and the Middle East, its DFS airport store revenue remains below 2019 pre-pandemic levels.” This highlights the uneven recovery of different retail channels within the luxury sector.
One of the most significant concerns is the performance of LVMH’s Fashion & Leather Goods division, which experienced a 6.1% decline in Q3 FY2024.
Price comments, “After previously resonating well with Gen Z consumers due to its strong social media strategy and innovative products, it is now increasingly suffering from the cutback in spend from aspirational shoppers as their savings wane.”
This shift in consumer behaviour, particularly among younger, aspirational buyers, is a key challenge for luxury brands that have relied on this demographic for growth in recent years.
The Wines & Spirits division also continued its downward trend, with revenue declining by 8.2% to €1.4 billion.
While this figure remains above pre-pandemic levels, the division’s performance underscores the normalisation of demand post-pandemic, as Price notes, “Wines & Spirits’ performance continued to disappoint amid the normalisation of demand post-pandemic.”
Looking ahead
As LVMH’s performance continues to reflect the broader struggles of the luxury market, the future remains uncertain.
Global economic headwinds, changing consumer habits, and the uneven recovery of key markets will likely keep the luxury sector under pressure in the months ahead.
However, as Price concludes, stimulus measures in markets like China offer some hope for recovery, though the sector is unlikely to see significant improvement in the near term.
The ongoing challenges facing LVMH serve as a reminder that even the most successful luxury brands are not immune to broader market shifts, and the road to recovery may be longer than anticipated.
