The price of LVMH’s (LVMH.PA) share price fell to its lowest point recently. The company claims that revenue growth is returning to normal after a Covid pandemic boom, blaming an “uncertain economic and geopolitical environment.”  According to analysts, the massive US and Chinese markets are a source of concern for luxury investors.

Credit: CNBC

This follows the French luxury group’s announcement of a slower growth in third-quarter revenues. It’s proof that the post-pandemic spending binge is being curbed by inflation and economic unrest.

The Decline Begins…

The shares of luxury houses are under pressure due to the slowdown in China and the uncertainty caused by rising interest rates in Europe and the US. Early trading saw a 6% decline in LVMH shares. They lost their ranking as the most valuable listed business in Europe in September. This was the company’s worst day since March 2020.

Additionally, impacted were the shares of competitors Kering (PRTP.PA), Hermès (HRMS.PA), Swatch (UHR.S), Richemont (CFR.S), and Burberry (BRBY.L).

LVMH is the world’s largest luxury goods company and owns the brands Louis Vuitton, Dior, and Tiffany & Co. It reported lower-than-expected third-quarter revenue growth. This was a rare setback for the company, which has frequently outperformed forecasts with strong double-digit growth in previous years.

“After three roaring years, and outstanding years, growth is converging toward numbers that are more in line with historical average,”

LVMH chief financial officer, Jean-Jacques Guiony, tells analysts, according to a Reuters report.

Sales at LVMH skyrocketed during the pandemic, propelling the business to record-breaking results and sending its share price to all-time highs this year. However, sentiment has been damaged by the underwhelming reopening in China and a decline in U.S. sales.

Last month, the luxury behemoth lost its position as the most valuable corporation in Europe based on market capitalization. It lost it to Novo Nordisk, a Danish pharmaceutical company whose shares have surged due to its weight loss medications Ozempic and Wegovy.

What Does the Future Hold?

“In an uncertain economic and geopolitical environment, the Group is confident in the continuation of its growth and will maintain a strategy focused on continuously enhancing the desirability of its brands, drawing on the authenticity and quality of its products, excellence in distribution and agile organization,”

LVMH says in a statement accompanying the results.

Since the recovery in China, a major growth engine for sales of luxury clothing, has been slower than anticipated. Investors have been doubting the market for shares in the luxury goods sector. Since the end of March, the value of ten of Europe’s top luxury goods stocks has dropped by around $175 billion. This is due to China’s difficult recovery and sluggish development, as well as the United States’ consumers’ need to tighten their pockets due to rising interest rates and high inflation.

According to RBC analyst Piral Dadhania, the prognosis for the upcoming year “remains muddied”. The declining earnings revisions for the industry are expected to persist.

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