PARIS – LVMH’s sales slowed in the first quarter as rising prices prompted more shoppers who aspire to own its luxury labels to hold back on splashing out thousands of dollars on handbags and other accessories.

Slower sales growth of 3 per cent reflected comparisons with the same quarter in 2023, when sales were boosted by the lifting of Covid-19 curbs in LVMH’s key market of China, and comes amid worries about a prolonged global slowdown which has knocked shares in luxury firms over the past year.

The world’s largest luxury group, owner of Louis Vuitton, Tiffany and Bulgari, said on April 16 that sales for the quarter ending in March rose 3 per cent on an organic basis to €20.69 billion (S$30 billion), matching expectations of analysts.

On a reported basis, sales at the group were down 2 per cent, largely due to currency effects.

LVMH, which is Europe’s second-largest listed company and worth nearly €400 billion, is the first luxury goods maker to report quarterly earnings, setting the tone as worries grow about demand in China, the world’s No. 2 economy.

In March, Gucci-owner Kering issued a surprise warning that first-quarter sales would slump 10 per cent, with sharp declines in Asia, casting uncertainty over the sector’s outlook.

LVMH said its Asia sales, excluding Japan, were down 6 per cent, with growth of 2 per cent in both Europe and the US.

The results were “broadly OK” against the most difficult comparison period of the year, said analysts at Bernstein, and would likely support LVMH’s stock.

In the second quarter, higher growth rates should start to kick in, they added.

The luxury industry is adjusting to slower demand after a period of stellar sales growth following the Covid-19 pandemic, when shoppers emerged from lockdowns with extra savings and a pent-up desire to treat themselves.

Barclays predicts growth rates will slow to mid single digits in 2024, down from nearly 9 per cent in 2023 and double digits the previous two years.

Chinese shoppers expected to fuel growth

Travelling Chinese shoppers are expected to fuel growth, although investors are increasingly nervous about recovery in China itself, where property price falls and unemployment among young people have dampened demand for high-end fashion and leather goods.

LVMH chief financial officer Jean-Jacques Guiony said he was “quite happy” with Chinese demand.

Purchases of Louis Vuitton products by Chinese buyers globally grew by around 10 per cent, he said, with an increasing proportion outside China as they resume travelling, particularly in Japan and to some extent in Europe.

LVMH’s fashion and leather goods division, which includes Louis Vuitton and Dior, saw sales climb 2 per cent, matching forecasts.

Sales in the division, which sells small Lady Dior handbags priced at €5,400 and roomy Louis Vuitton Speedy bags for €10,000, had risen by 9 per cent year-on-year the previous quarter.

In the US, LVMH has seen “continuous strength” from clients at the top end and “very gradual improvement” from aspirational customers, who continue to be impacted by inflation, Mr Guiony said in a call with analysts.

It will take time for these customers to adapt to the higher prices implemented by the industry in recent years, he added.

LVMH shares have been volatile since signs of a luxury slowdown emerged, and are down 11 per cent over the past year.

Shares of Kering, which is revamping Gucci, and Burberry, are down 40 per cent and 55 per cent, respectively. Hermes, meanwhile, has outpaced rivals as the ultra-rich continue to splurge on the label’s high-priced Birkin handbags, with shares up 16 per cent over the year. REUTERS