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Luxury companies have not had it easy in recent years.<\/p>\n
First came the pandemic, then an affordability crisis driven by high interest rates, and now, sluggish demand from Chinese shoppers has depressed business for several luxury players.\u00a0<\/p>\n
If there\u2019s a respite in sight, the industry\u2019s bellwether, LVMH, would be first to know as it\u2019s the largest luxury group in the world.\u00a0<\/p>\n
But it looks like the fortunes haven\u2019t turned just yet. On Tuesday, LVMH reported a revenue of \u20ac41.7 billion<\/a> for the first half of this year, shrinking by about 1% compared to the same period in 2023.\u00a0<\/p>\n Organic revenue in its largest business segment\u2014fashion and leather goods, including brands like Loewe and Celine\u2014rose by 1%. Meanwhile, the selective retailing unit, which houses Sephora, jumped by 8%. Its wine and spirits segment\u2019s sales fell 9% year-over-year.\u00a0\u00a0<\/p>\n \u201cContinued economic and geopolitical uncertainties are still impacting certain businesses, notably wine and spirits,\u201d LVMH CFO Jean-Jacques Guiony said during the company\u2019s earnings call on Tuesday.\u00a0<\/p>\n \u201cSome of our brands are indeed enjoying stellar growth rates. But I think we should also highlight the timeless appeal of our flagship brands that meets fast-evolving consumer tastes.\u201d<\/p>\n Results in Asia (except Japan) point to why LVMH has fallen behind\u2014organic sales dipped by 14% in the three months to June after a 6% drop in the first quarter of 2024. While China continued to remain a weak spot for the luxury behemoth, Chinese travelers splurged overseas and boosted sales in Japan, thanks to a weak yen.\u00a0\u00a0\u00a0<\/p>\n \u201cWhile remaining vigilant in the current context, the group approaches the second half of the year with confidence,\u201d LVMH\u2019s chairman and CEO Bernard Arnault said.<\/p>\n LVMH ushered in the year triumphantly after a strong holiday season,<\/a> with a 10% sales surge in the last three months of 2023. It looked like the luxury industry could turn a new leaf. But in Q1, the Arnault-owned company faced a slowdown in growth as people continued to pull back<\/a> on spending.\u00a0<\/p>\n LVMH\u2019s Guiony said he was \u201cquite happy\u201d with the outcome as it looked based because of a high base in early 2023 following the scrapping of China\u2019s zero-COVID policy.\u00a0<\/p>\n Some of LVMH\u2019s high-end competitors have struggled in recent months. For instance, Swiss giant Richemont, which owns Cartier and Piaget, saw flat sales owing to Chinese shoppers\u2019 poor appetites.\u00a0<\/p>\n Meanwhile, Gucci-owner Kering has also faced the impact of consumers shunning luxury<\/a> purchases. Other relatively small players have been decimated by this trend, too\u2014Swatch\u2019s profits fell 70%<\/a>, while Burberry has issued multiple profit warnings over its slumping sales<\/a>.<\/p>\n Few have dodged making losses in their China business\u2014the bag-maker Hermes is an outlier<\/a>. It\u2019s continued to see growth in sales even while other high-end bag and apparel companies failed to do so.\u00a0<\/p>\n LVMH\u2019s struggle with improving sales in China won\u2019t last forever, Mario Ortelli, managing partner of luxury advisory firm Ortelli&Co, told Fortune<\/em>.<\/p>\n \u201cAfter the booming recovery of luxury spend post-Covid, a normalisation in the pace of growth is not surprising, especially considering the current subdued economic environment in Asia. However, as soon as the economic environment improves, we should expect an acceleration of the luxury spend,\u201d he said. <\/p>\n \u201cThe silver lining in LVMH results is that despite the difficult market conditions LV and Dior were able to keep their sales levels with just a limited decrease of profitability.\u201d<\/p>\n The French luxury conglomerate\u2019s Italian subsidiary, which makes Dior goods, is also being investigated<\/a> over alleged worker exploitation practices. During LVMH\u2019s earnings call, Guiony said the company wasn\u2019t aware of the situation but accepted \u201cfull responsibility for what happened\u201d and would ramp up audits of its supply chain in response.<\/p>\n<\/div>\n