Cracks in Global Luxury: LVMH’s 5% Drop in Fashion and Leather Dampens Industry Optimism

The ongoing real estate slump in China and emerging signs of spending fatigue in the United States weighed on Bernard Arnault’s flagship maisons in the third quarter, while jewellery and Sephora provided a vital cushion for the conglomerate.

LONDON. The global luxury sector is facing a severe strategic correction. LVMH, the world’s leading high-end conglomerate controlled by the family of chief executive Bernard Arnault, has opened the corporate earnings season with a setback in its core business engine: organic sales in its flagship fashion and leather goods division fell 5% in the third quarter compared to the same period last year.

The contraction was markedly steeper than the 1.8% decline projected by analyst consensus for the quarter ending September. The drop brought an abrupt halt to the nascent growth achieved in the previous quarter, which had followed two consecutive years of stagnation for the group’s marquee division—home to heritage houses including Louis Vuitton and Christian Dior.

Synchronised Headwinds in China and the United States

The downturn highlights how hopes of a swift sector recovery after nearly four years of deceleration have largely evaporated. Over the past two months, persistent inflation, the conflict in the Gulf, and broader geopolitical turmoil have combined to directly erode the purchasing power of luxury consumers worldwide.

The cooling demand is particularly evident across two pivotal geographies:

The Chinese Market Slump: Anticipated recovery in China has been undermined by structural troubles across the domestic real estate market, which continue to suppress consumer confidence. Adding to the friction, Louis Vuitton faced localized consumer backlash over the summer after pursuing trademark infringement litigation against popular Chinese tea brand Molly Tea.
Softening Demand in the US: While resilient American consumer spending had helped buffer Asian weakness earlier in the year, the US market is now showing unmistakable signs of fatigue. Recent credit card spending data released by Citibank revealed that luxury spending in the United States dropped by at least 4% month-on-month in each of the past three months.

Jewellery and Beauty Provide Essential Counterbalance

Across the broader group, total revenue edged up by just 1% on an organic basis during the quarter, reaching €18.5 billion. The figure came in slightly below the 1.3% growth anticipated by the market, supported primarily by resilient demand in the jewellery division and strong momentum in selective retailing, led by beauty and cosmetics retailer Sephora.

Reaffirming its long-term brand equity playbook amidst macroeconomic turbulence, the group stated: “Despite an uncertain economic and geopolitical environment, the group remains confident and will maintain a strategy focused on continuously enhancing the desirability of its brands.”

Valuation Squeeze and a Warning for the Industry

Financial markets have reflected this cautious climate. LVMH shares have declined by nearly 40% year-to-date, bringing the conglomerate’s market capitalization down to approximately €190 billion—less than half of its record high recorded in 2023.

LVMH’s performance marks the start of what analysts anticipate will be an exacting reporting season across the luxury landscape, warning that weaker consumer demand is poised to test even historically resilient luxury houses such as Hermès.