Luxury giant LVMH witnessed a dramatic plunge in its shares, falling by as much as 8% on Wednesday. This substantial dip came in the wake of the company’s announcement that its third-quarter revenue growth had decelerated significantly compared to the first half of the year. The French conglomerate unveiled its earnings late on Tuesday, revealing that sales were gradually returning to pre-pandemic levels, marking an end to three years of extraordinary growth driven by pent-up consumer demand. This robust performance had propelled the company’s stock up by 65% since October 2020.
Jean-Jacques Guiony, LVMH’s Chief Financial Officer, emphasized during a Tuesday analyst call that, “After three roaring years and outstanding performance, our growth is now converging towards figures more in line with historical averages,” as reported by Reuters. By early afternoon in Paris on Wednesday, LVMH shares had recovered slightly but still traded nearly 6% lower compared to earlier in the day.
In the third quarter, the company’s revenue grew by 9% to nearly €20 billion ($21 billion), a notable decrease from the 17% surge in the second quarter and a comparable increase in the first quarter. LVMH, the owner of esteemed fashion and beverage brands such as Louis Vuitton and Moët & Chandon, has long been regarded as a bellwether for the broader luxury goods sector.
Of particular concern was the 14% drop in sales within the company’s wines and spirits division for the third quarter. LVMH explained in a press release that various factors, including the economic climate, high inventory levels among retailers, and a “normalization” of demand post-pandemic, had impacted the demand for its Hennessy cognac in the United States.
Additionally, LVMH is grappling with lackluster demand in China, one of its most significant markets. The Chinese economic rebound that followed the easing of Covid restrictions late last year has rapidly waned. According to the company’s latest results, LVMH reported an 11% increase in revenue in Asia excluding Japan, representing less than a third of the impressive 34% growth achieved in the second quarter. Unfortunately, specific figures for China are not provided by the company.