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Actress Liu Yifei at the Louis Vuitton Cruise 2025 show at Park Guell in Barcelona. Cruise 2025.
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LVMH’s third-quarter sales indicate a chink in the luxury group’s armor. On October 15, it reported that revenue from the fashion and leather goods division fell 5% to €9.15 billion with group sales down 3% to €19.08 billion.
Chief financial officer Jean-Jacques Guiony stated on an earnings call that the division saw slight improvement with Europeans and Americans but “worse performance with Chinese and Japanese.” Given LVMH’s status as an industry bellwether, this is pertinent—in particular from a group that owns houses like Louis Vuitton, Dior, and Loewe as well as Rihanna’s Fenty Beauty which expanded its retail presence in China.
Usually contracyclical, luxury (and LVMH) has shown incredible resistance over the last number of years—especially in China. That’s no longer the case. Louis Houdart, managing partner Greater China of luxury consultancy MAD, thinks financial analysts tend to misunderstand China’s recovery trajectory following its COVID-19 strategy.
“China completely sealed down the country at the beginning of the pandemic and consumers were shopping only within the border,” he wrote in a note. Houdart, who lives in Shanghai, stressed the importance of looking at the big picture. Q4 2024’s travel shows a bounce back to around 80% of the 2019 period. With it, a return for some to pre-pandemic shopping habits.
He continued: “Chinese consumers have started to travel again and to shop overseas. It is important to look not only at year-on-year growth but actually at pre-COVID versus now.”
Minghao Xu attends the Louis Vuitton Pre-Fall 24 Show, April 2024 in Shanghai
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China’s ongoing economic headwinds (a housing crisis, high youth employment, and a struggling middle class) have visibly dented consumer confidence. The latest edition of Shanghai Fashion Week (SHFW) was more low-key and a visit to the city’s shopping malls, department stores, and a selection of multi-brand shops showed they were, on the whole, glaringly empty. This doesn’t point to any notable lack of interest in fashion or products per se, merely a desire for “more meaningful and stylish brand interactions,” shared an industry insider.
Against this backdrop, local retailer Dongliang launched an impressive multi-million dollar luxury store during the fashion week. Housed in a lavishly revamped historic villa in the Changning district, Maison Dongliang stocks international brands like The Row, Lemaire, and Maison Margiela across three floors and 700 square meters for the city’s HNWIs.
Some consider this negativity as merely temporary. At Dongliang’s glamorous opening, one luxury consultant confidently announced that China’s luxury appetite will return in Q3 2025. Investment firm Jefferies is counting on a healthy acceleration in demand from Chinese consumers next year.
CFO Guiony said the drop is “a cyclical downturn.” On the call, he said that the group is still banking on the future emergence of the upper middle class in China (as elsewhere). It has maintained a solid on first tier cities, including immersive activations this year such as L’Or de Dior exhibition at Beijing’s Guardian Art Center and Louis Vuitton’s Voyager show which stopped in Shanghai.
With Kering and Hermès due to report their Q3 earnings on 23 and 24 October respectively and Richemont filing its fiscal first half in November, the current picture will become clearer.
For Houdart, LVMH’s earnings spell out the end of China’s double digit growth but added: “Consumers will still consume, even if they consume less and more carefully.”
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