Rising inflation, growing global instability and falling demand for high-end drinks have been blamed for a slowdown in growth at the luxury goods multinational LVMH, owner of Christian Dior, Louis Vuitton and Moët & Chandon.
The group, whose brands also include Stella McCartney, Tag Heuer watches and Bulgari and Tiffany jewellery, reported revenue of €20bn (£17.25bn) between July and September – a 9% rise. That compares with a 17% increase in the previous quarter.
Shares in the multinational, which lost its title as Europe’s most valuable listed company last month to the Danish anti-obesity drugmaker Novo Nordisk, were down by about 6% in early trading, set for their worst day since March 2020.
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One of the worst hit parts of LVMH’s business was its wines and spirits division, which includes Hennessy cognac, which fell 14% in the quarter.
The results released on Tuesday suggest the post-pandemic boom in luxury goods, which helped LVMH become Europe’s first company to reach a $500bn valuation earlier this year, is starting to ebb.
Pauline Brown, the group’s former chair in North America, argued increasing global instability was a factor in the slowdown.
“If I was still sitting on the board at LVMH or any of the other luxury companies, what would really be rattling me is the geopolitical destabilisation around the world,” she told BBC Radio 4’s Today programme on Wednesday.
Brown added: “Luxury goods and purchases is a psychological purchase. Nobody needs a glass of champagne, nobody needs a watch or a diamond necklace … In order for you to buy it for yourself or as a gift, you really have to be in the right mood state. When we see atrocities happening … the appetite to spend on what might be perceived as frivolous goes way down.”
Referring to the fall in the wines and spirits division, she said: “About half of that business is one brand, Hennessy. There are closer to 30 brands in the wine and spirits division. The other half is primarily champagne, which actually grew – not robustly, I think by 3% in the quarter – but I think it was all on the cognac side, the drop, the negative.
“I think that [cognac] was hit hard in markets like China and North America because that aspirational consumer just isn’t spending with the same enthusiasm that the high net worth is.”
LVMH is the first big global luxury firm to report earnings this quarter, with Hermès and Kering due to report on 24 October.
The group’s chief executive, Bernard Arnault, is the world’s second richest man. He took the top spot last December, overtaking Elon Musk, but the two swapped places again this year.
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Arnault, who co-founded the luxury goods group 35 years ago, has appointed his children to key roles within the business. This year, his eldest child, Delphine, was named the head of Christian Dior, the second-biggest brand in the empire, while her brother Antoine was promoted to run the holding company that controls LVMH and the Arnault family fortune.
Alexandre Arnault is an executive at Tiffany, Frédéric Arnault is the chief executive of TAG Heuer, while their youngest sibling, Jean Arnault, heads marketing and product development for Louis Vuitton’s watches division.
The LVMH results came as accounts for Selfridges showed the upmarket department store chain had experienced a 29% rise in revenue to £844m for the year to 28 January.
The company said the improved performance had been “driven by strong footfall and sales through the company’s physical stores, particularly Oxford Street in London and Exchange Square in Manchester”.
However, the accounts for Selfridges Retail, which includes its four UK stores, website and mobile app, show the firm lost £38m for the 12 months to January 2023. The company put the loss down to the application of a new accounting standard, which it said had no impact on its cashflow.