LVMH sales miss estimates on slowdown in luxury spending

By Mimosa Spencer

PARIS (Reuters) -LVMH sales slowed in the second quarter as shoppers stung by a rise in prices held back on splashing out on high end fashion, likely offering little reassurance to investors worried about slowing growth in the luxury goods sector.

Sales at the world's biggest luxury group and owner of labels Louis Vuitton, Tiffany & Co. and Hennessy, grew to 20.98 billion euros ($22.8 billion), a 1% rise on an organic basis, which strips out currency effects and acquisitions.

The figure undershot analyst expectations for revenues of 21.6 billion euros, according to an LSEG poll based on six analysts.

The report from sector bellwether LVMH, which is Europe's second-largest listed company, worth around 340 billion euros, comes amid concerns about weak sales of designer fashions in the sector's key market, China.

Profit warnings from smaller labels Burberry and Hugo Boss last week reinforced worries that middle-class shoppers in the world's No. 2 economy are pulling back on purchases as a property slump and job insecurity weigh on appetite to splurge.

LVMH said its sales in Asia, excluding the Japanese market, fell by 14% in the second quarter, worsening from a 6% drop in the first quarter.

Sales in Japan, however, where shoppers are taking advantage of the weak yen, continued to grow.

LVMH CFO Jean-Jacques Guiony said that it was difficult to provide an outlook on the Chinese market, but added that "the Chinese customer is holding up quite well".

Operating profit for the first half was 10.65 billion euros, with an operating margin of 25.6%, down from 27.4% a year ago.

That compared to expectations for 11.11 billion euros in and a 26.2% margin, according to consensus provider Visible Alpha.

"All in all, this shouldn’t be an insurmountable problem, given the minimal size of the miss and the significant pullback the LVMH share price has suffered since the initial post 4Q23 reporting euphoria," said Luca Solca, analyst at Bernstein.

LVMH shares have been volatile since the luxury slowdown emerged, and are down about 20% over the past year.

The group's fashion and leather goods division, which includes the Louis Vuitton and Christian Dior brands and accounts for nearly half of group sales and the bulk of operating profit, grew 1%, slowing slightly from the previous quarter's 2% rise.

Gucci-owner Kering reports first half results on Wednesday and Hermes reports on Thursday.

($1 = 0.9212 euros)

(Reporting by Mimosa Spencer; Editing by Jon Boyle and Emelia Sithole-Matarise)