Marking its first quarterly sales drop since the pandemic, amid weakening demand in China and Japan, French luxury giant LVMH reported a 3 per cent decline in sales during Q3, FY25. The company generated €19.08 billion ($20.8 billion) in revenuesduring the three months ending in Sep 2024.

This figure fell short of the consensus estimate of 2 per cent organic growth, as cited by Barclays. Analyst Luca Solca, Bernstein remarks, LVMH ‘badly’ undershot expectations, with ‘misses across the board.’

A first from a major luxury company for the quarter, the sales report comes after weeks of volatility in luxury stocks. Recent stimulus measures in China briefly sparked hopes for a recovery, but Chinese consumer confidence remains at historic lows, says Jean-Jacques Guiony, Chief Financial Officer, LVMH.

Along with a larger sales drop at Italian luxury brand Ferragamo, LVMH's report is likely to add to market uncertainty, opines Flavio Cereda, Co-Manager –Luxury Brands Investment Strategy, GAM.

The company's fashion and leather goods division, which includes iconic brands like Louis Vuitton and Dior, posted a 5 per cent sales decline, missing forecasts of 4 per cent growth and marking its first sales drop since 2020. This division accounts for nearly half of LVMH's total revenue and around three-quarters of its recurring profit.

In Asia, excluding Japan, where China is the dominant market, sales declined by 16 per cent from a 14 per cent in the previous quarter.Meanwhile, in Japan, the company’s sales growth slowed sharply to 20 per cent, from a 57 per cent increase in the previous quarter, partly due to the stronger yen.

The results reflect a more pronounced slowdown than expected in the luxury sector, with analysts like Piral Dadhania from RBC Capital predicting a negative market response. UBS had already forecasted that the third quarter would be the weakest for the luxury sector in four years, projecting a 1 per cent Y-o-Y decline in organic sales.