LVMH Warns of ‘Uncertain’ Conditions Amid 3% Drop in Luxury Sales

LVMH saw quarterly sales dip amid an “uncertain economic and geopolitical environment.”

The luxury retail giant reported third-quarter earnings that showed a 3% drop in revenues — to 19.1 billion euros — while sales in its core fashion and leather goods units — which includes brands like Dior and Louis Vuitton — dropped 5%.

Both the company’s group revenue and sales were below analyst expectations, the Financial Times (FT) reported.

“There were misses across the board,” Luca Solca, analyst at Bernstein, told the FT. “We see LVMH as the weakest among the quality names. Richemont we believe will be better, Hermès will be best.”

The Paris-based company said the drop “mainly arose from lower growth seen in Japan, essentially due to the stronger yen.”

Per the FT report, Chief financial officer Jean-Jacques Guiony told analysts that consumer confidence in mainland China had dipped to COVID-era lows as consumers there scale back their spending amid a darker economic outlook and weak housing market.

PYMNTS wrote about the luxury sector last week, noting that a series of partnerships and acquisitions in this space were critical strategies for navigating an increasingly complicated economic landscape.

The report came in the wake of Mytheresa’s acquisition of YNAP from Richemont, with the aim of creating a leading global digital luxury group. 

“This move will combine Mytheresa with YNAP’s renowned brands, including Net-A-Porter and Mr. Porter, enhancing the luxury offerings available to high-end consumers. The integration aims to leverage the strengths of both companies, merging their unique brand propositions and operational efficiencies while maintaining distinct identities,” PYMNTS wrote.

At the same time, the launch of the Authentic Luxury Group (ALG) by Authentic Brands Group and Saks Global marks another significant collaboration. Retail analysts point out that these collaborations can bring about operational efficiencies, allowing luxury brands to streamline back-end functions and reach a broader audience. 

By sharing resources and insights, companies such Mytheresa and Authentic Brands Group are setting themselves up to thrive in a challenging market.

“Mytheresa’s acquisition of Yoox Net-a-Porter is a prime example of how companies are partnering to create operational efficiencies, scale operations and expand their reach to multiple segments of luxury consumers,” Amanda Lai, a retail analyst and director for consultancy McMillanDoolittle, told PYMNTS.

“The combined entity can likely reduce costs by consolidating many of its back-end business functions, such as legal, IT and human resources while leveraging its multiple brands — MyTheresa, Net-A-Porter, and Mr. Porter — to reach different high-end consumers.”

The post LVMH Warns of ‘Uncertain’ Conditions Amid 3% Drop in Luxury Sales appeared first on PYMNTS.com.