Lvmh, revenues below market expectations down 3%

'We are entering 2025 with confidence,' Bernard Arnault, chairman and ceo of Lvmh, had commented at the end of January on the occasion of the 2024 budget figures. The first quarter numbers, however, were disappointing compared to market estimates. The French luxury giant recorded a 3% drop in revenues to EUR 20.3 billion in the first quarter of the year, missing analysts' expectations and confirming a generalised slowdown in the sector, in an uncertain macroeconomic environment that has pushed consumers to curb their purchases of high-end goods. The figure, in fact, compares with a 1% growth in Q4 2024 and market forecasts that pointed to a 2% expansion for the period January-March 2025.

The performance of the fashion & leather goods division - which includes Louis Vuitton and Dior and accounts for almost half of group sales and over three quarters of operating margin - was particularly disappointing, with sales down year-on-year by 5% to €10.1 billion, compared to estimates that indicated a hold on the previous quarter's levels, when revenues stood at €11.1 billion. According to Bernstein's analysts, the Dior brand was the main drag on performance, due to a change in creative direction, the effects of which are being delayed. In fact, the division had already posted a 1% drop in revenue for the full year 2024, while group sales rose by 1%.

More generally, all divisions showed signs of weakness, with the exception of the watches and jewellery segment, which remained stable. The sharpest decline was seen in wines and spirits, down 9%, but the cfo in a conference call denied rumours of a spin-off of the division.

Expectations for the sector were for a recovery in demand from high-income US customers, at a time when China is still not showing encouraging signs. The growing fear of a recession in the US, however, is slowing down sales of luxury goods. Geographically, revenues in the US saw a 3% drop, while in Asia (excluding Japan) the decline was even more marked at -11%. Japan recorded a -1%, while Europe was in positive territory with a 2% increase in sales.

Although the luxury sector can count on high margins and the possibility of an upward revision of prices to absorb the impact of the duties announced by Trump - which if fully implemented would include a 20% tax rate on European fashion and leather goods and 31% on Swiss watches - uncertainty about the sector remains high. "In a turbulent geopolitical and economic environment, Lvmh remains vigilant but confident at the start of the year," the group said in an official note.