Sales Growth Rate Sharply Slows from 21% a Year Ago
Chinese Consumers Delay Luxury Purchases Awaiting 'Enjeo Discount'
The world's largest luxury group, Louis Vuitton Mo?t Hennessy (LVMH), is shaking. This is due to the slowdown in demand from Chinese consumers, who dominate the luxury market. With disappointing performance and a drop in stock prices, Bernard Arnault, chairman of LVMH, has become the billionaire whose net worth has evaporated the most this year.
According to Bloomberg and others on the 24th (local time), LVMH's sales in the second quarter reached 20.98 billion euros (about 31 trillion won), growing only 1% compared to the same period last year. This contrasts sharply with the 21% sales growth recorded just a year ago. It also fell short of the market forecast of 21.6 billion euros compiled by LSEG (London Stock Exchange Group). In addition, wine and spirits sales decreased by 5% year-on-year, and sales in the watches and jewelry sector also fell by 4% during the same period.
The main cause of this sales slowdown is attributed to the contraction of the Chinese market. The real estate market slump and weak domestic demand in China, combined with an increase in Chinese shoppers taking advantage of the weak yen to purchase luxury goods at a discount, have put pressure on margins. LVMH reported that sales in Asia, excluding Japan, fell 14% year-on-year in the second quarter, while sales in Japan surged 57% during the same period.
Jean-Jacques Guiony, LVMH Chief Financial Officer (CFO), said, "Chinese shoppers who prefer to buy luxury goods overseas have started traveling to Japan, taking advantage of the weak yen, and are postponing luxury consumption." He added, "It is difficult to provide a forecast for the Chinese market, but there is no sign that Chinese consumers' interest in our brands is waning."
Following the disappointing results, LVMH's stock price fell 4.66% compared to the previous session on the Paris Stock Exchange that day. During the session, it plunged as much as 5.2%, marking the largest single-day drop since October last year. According to the Bloomberg Billionaires Index, this week's stock price decline made Chairman Arnault the billionaire whose net worth has decreased the most worldwide this year. Arnault's net worth has dropped by $20 billion this year, surpassing the previous record held by Zhong Shanshan, known as China's richest man. Zhong Shanshan is the founder of Nongfu Spring, a Chinese bottled water company.
Meanwhile, LVMH, led by Chairman Arnault, pledged 150 million euros (about 220 billion won) to the upcoming Paris Olympics, establishing itself as one of the largest sponsors of the event. The company mobilized its brands such as Louis Vuitton, Chaumet, and Berluti to make medals, athlete uniforms, torch relay cases, and provide wine and other alcoholic beverage services, aiming to leave a strong impression. This is interpreted as an effort to reverse the sales slowdown trend through the Olympics.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
