Will Kering, Hermès mirror LVMH’s Q3 sales decline?

Luxury kingpin LVMH yesterday announced that the company’s critical fashion and leather goods division’s Q3 sales had fallen by around 5% YoY, missing analyst expectations of 0% to 2% growth. Overall group revenue fell 3% to 19.1 billion euros ($20.8 billion) in the three months to September 30 compared with the same period last year, falling short of analyst predictions of a 1% increase. Following the news, LVMH shares dropped by 7%. The world’s largest luxury group cited cooling growth across Japan, impacted by the yen’s recent weakness, as a key contributor to the decline. The downturn was also fueled by sluggish consumer spending in China; LVMH’s sales in Asia outside of Japan fell 16% YoY in the third quarter, while those in the US, the biggest luxury market, remained stagnant. Often regarded as the bellwether of the luxury sector, LVMH’s sales dip paints a bleak picture for what’s to come ahead of Kering and Hermès earnings results due to be posted next week – the former having already recorded a lackluster first half. Kering’s revenue fell 11% to 9 billion euros (approx $9.8 billion) in the H1 2024, compared to the same period last year. The group expects a 30% drop in recurring operating income as its star label Gucci continues to struggle – second-quarter sales for Gucci dropped 19% to 2 billion euros, after an 18% decrease in the first quarter. Hermès, meanwhile, has so far managed to avoid the luxury market’s decline, thanks to its more resilient ultra-wealthy client base. Group sales jumped 13% YoY in Q2, surpassing predictions of an 11.5% increase. Hermès’ revenue at constant exchange rates totaled 3.7 billion euros ($4.02 billion) in the quarter, with Europe (excluding France) leading total revenue growth with sales up 18%. While competitors recorded losses in China, Hermès kept sales stable. LVMH’s slip is the latest blow to the luxury segment, a market that is grappling with prolonged downturns spurred by a weak macro environment. After advancing 4% at current exchange rates in 2023, the personal luxury goods market dropped between 1% to 3% in the first quarter 2024, according to Bain-Altagamma's Luxury Goods Worldwide Market Study. Last month, HSBC announced that it expects only 2.8% organic growth for the global luxury goods sector in 2024, down from an earlier forecast of 5.5%. After a challenging summer for luxury players, concerns are mounting about the duration of the current luxury downturn. Kering and Hermès’ results next week will provide clearer insight into consumer behavior trends and, more importantly, how brands should be preparing for 2025.

Will Kering, Hermès mirror LVMH’s Q3 sales decline?

On this page

Published October 16, 2024

Sectors

Insights

Company

Will Kering, Hermès mirror LVMH’s Q3 sales decline?