LVMH sales dip signals broader challenges for the luxury industry

A 5 percent decline in quarterly sales may not spell disaster for LVMH's annual revenue, but for a bellwether like this luxury giant, the stagnation in its fashion and accessories portfolio signals broader challenges for the entire industry. LVMH, long heralded for its ability to weather economic downturns and outpace its competitors, is now facing headwinds that go beyond mere sales figures.

Historically, LVMH has bucked industry trends, driving growth through strategic price increases, expansion into new markets, and by creating highly coveted niches. Yet, even the massive marketing push during last summer’s Olympics, where LVMH brands were among the most visible, has not translated into analysts' anticipated boom in sales. Although it may be premature to suggest “Louis Vuitton fatigue,” there is a growing disconnect between consumer demand and luxury offerings. Factors like inflation, high living costs, and a perceived lack of innovation in luxury products are causing consumers to rethink their purchases.

Over the past five years, the price of luxury handbags and accessories has nearly doubled, creating a stark divide between aspiration and affordability. For the loyal LVMH customer, a question arises: if you already own a small portfolio of bags, does a new Celine purchase justify splurging on another Dior, Fendi, or Louis Vuitton? The era of closets brimming with luxury handbags feels increasingly out of touch, especially as the rise of the resale market offers consumers access to similar styles at lower prices.

China, once a beacon of growth for luxury brands, is also showing signs of strain. Chinese consumers are grappling with economic pressures, including mortgage payments in a faltering housing market, leaving little room for discretionary luxury spending. Moreover, the price disparity between Europe and China has fueled the rise of the grey market, with apps like DeWu offering discounted luxury goods imported through unofficial channels. This trend highlights how even affluent consumers are now scrutinizing prices, raising the question: “Who really needs another handbag?”

“Who needs another handbag”?

In the background, LVMH's brands are undergoing significant changes. After months of speculation, Celine confirmed the departure of Hedi Slimane, while Kim Jones left Fendi and Sarah Burton stepped in at Givenchy. These leadership shifts, while not always immediately noticeable to the consumer, can undermine confidence in brand stability. Despite LVMH’s assurances that it will rely on its powerful portfolio and talented teams to reclaim global leadership in 2024, the shake-ups suggest the group is still navigating through a period of transition. Uncertainty also lingers over the future of Dior's creative direction under Maria Grazia Chiuri and how collections from new leaders like Michael Rider at Celine will be received.

Meanwhile, LVMH has quietly shed some underperforming brands, including Off-White and could even offload others, like Stella McCartney, where it retains a minority stake. These moves indicate a sharper focus on profitability in a challenging market.

As the rest of the luxury sector prepares to release its third-quarter results—Kering on October 23 and Hermès on October 24—LVMH’s performance is expected to set the tone for the industry. With Kering already reporting double-digit declines earlier this year, a continued downturn could signal that luxury’s golden age of boundless growth may be entering a more cautious era.