LVMH sales dip amid tariff turmoil
It has been an awful start to the year for luxury goods groups, and the biggest, LVMH, has been hit hard by the turmoil. Ron Emler reports.
LVMH’s sales in the first three months of this year had been expected to be poor, but they missed analysts’ predictions by a wide margin as US consumers were wary of spending on fashion and beauty products, and China remained in the doldrums.
Keen observers had predicted 2% growth in overall sales in the quarter, but they slumped by 3%.
Sales in the US were 3% lower compared with last year, while in Asia, excluding Japan, they were down 11%. Total group sales for the three months to the end of March were €20.3 billion ($23.08 billion).
Champagne and Cognac
Once again the wines and spirits division, Moët Hennessy, was hit by weakening demand for Champagne and by Cognac being caught in a perfect storm as Americans continue to move away from the category (leaving all groups considerably overstocked) plus being caught in the crossfire as China and the European Union continued their tariff war over cheap Chinese electric cars and components.
Drinks sales fell by 9% on an organic basis with Champagne “reflecting the ongoing normalisation of demand”. Cognac, the group said it, “was held back by weaker demand in China and the United States,” but the Provencal rosé wines “experienced a good start to the year”.
The fashion and leather goods division, which accounts for nearly half of group sales and over 75% of its profit, posted a 5% fall in sales, below expectations for a flat performance.
Trump tariffs
The results more than confirmed widespread fears that luxury goods companies could face a very tough year following President Donald Trump’s recent tariff announcements, which have sparked fears of a recession.
LVMH’s finance chief, Cecile Cabanis, said that the global turmoil created by President Trump’s tariffs and the threat of an international trade war were making planning and forecasting extremely problematic.
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“These days, parameters are changing every hour,” she said.
Trump and Brussels have put a three-month pause of their threatened retaliatory tariffs that would have impacted both Cognac and US bourbons, but all imports to the US remain subject to an extra 10% penalty.
China, too, has stayed its hand on imposing a 35% tariff on Cognac, but the deposit scheme on the French spirit remains.
LVMH responds
It was notable that the LVMH chairman, Bernard Arnault, who was a special guest at Trump’s inauguration in January, did not comment on the numbers.
“In a disrupted geopolitical and economic environment, LVMH remains both vigilant and confident at the start of the year,” the company said.
The shares fell by 7% overnight in New York and by 5% in Paris this morning.
In a bid to calm investors, LVMH said: “The group remains focused on the development of its brands, driven by a sustained policy of innovation and investment as well as by a constant quest for quality in its products, their desirability and their selective distribution.”
Cabanis said the company was still looking at producing more in the United States (and thus avoid tariffs), “but we’ll see at what pace and how much we want that to evolve,” she said.
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