The European multinational luxury and fashion company Lmvh is slowing down stock markets across the continent. Some unexpected results, mainly linked to sales in China, have caused the stock to suddenly fall to Paris. From there the contagion spread to all the large companies in the sector with drops recorded both in Frankfurt and Milan.
The problem is not only the slight slowdown in quarterly accounts shown by Lvmh, but the regional data that the company’s financial report contains. The multinational, owned by one of the world’s richest billionaires, had resisted well the decline in domestic consumption in China, one of its main outlet markets, until the second quarter of 2024, when Beijing’s demand crisis also reached luxury.
Sales in China collapse, LVMH in difficulty
The publication of the half-yearly accounts of the luxury multinational Lvmh, which took place yesterday, was very disappointing for analysts. Revenues stopped at 41.7 billion euros, almost half a billion less than in the same period of 2023. Even though revenues of 10.7 billion showed an operating margin on turnover of 25.6%, the stumble in turnover is worrying.
Although it is not very well known to the general public with the acronym that identifies the group, LVMH controls some of the most famous luxury brands in the world. From fashion with Dior, Louis Vuitton And Fendi to the jewels with Bulgarians, up to distribution, with Sephoraalso reaching wines with the Belvedere brand, among others.
After a relatively calm close on July 23, LVMH stock reacted very badly to these data on the morning of the 24th. In Paris, the value of its shares fell by 5%. dragging the entire Cac 40 to a 1.5% decline. Fear soon spread to the entire European luxury sector, with Moncler in Milan recording a -2.4% and Kering in Paris following the trend of LVMH with losses of more than 4 percentage points.
The Reasons for the Slowdown of European Luxury: China’s Consumer Crisis
Apparently the data of Lvmh are not that serious. The company is still largely profitable, growing in many areas and is not in difficulty in any of the sectors it deals with. But it is the reason behind the decline in revenue that has scared analysts and caused panic on the stock market.
LVMH has in fact recorded a drop in sales in China. Beijing is one of the strongest markets for the company, which had taken advantage of the rapid enrichment of some social classes to position itself within the Chinese economy, becoming a symbol of success with its products.
For several months now, however, China has been struggling to reinvigorate its internal consumption. In the first quarter they had remained weak, at +2.3% which forces the entire economy to rely on exports to grow in a context of international tension that is unfavorable to trade. LVMH had remained immune to this effect at least until the first half of 2024. Now it seems that the crisis in Chinese consumption has also reached luxury.
