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Paris Olympics sponsor LVMH faces market instability
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Paris Olympics sponsor LVMH faces market instability
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Luxury company and one of the main sponsors of the Paris Olympics, LVMH, popularly known for the “Louis Vuitton” and “Dior” stores, saw its shares fall by 4.66% this Wednesday (24). The fall follows and represents the “cascade effect” in the luxury sector, with Hermes International SCA falling by 3% and Kering by 4%.
LVMH's results have been disappointing since last year, when it saw a 20% decline. In the second quarter of this year, its sales increased by 1%, a figure below analysts' forecasts. Despite this, Luca Solca, from Bernstein, points out that the situation can be resolved:
“LVMH has slowed down amid moderating luxury demand… This should not be an insurmountable problem.”said Luca.
Chinese demand
Although the luxury market is seen as less susceptible to financial crises in the world, resisting them for longer, the slowdown in the sector is a result, among other factors, of the decline in consumption in China. There was a 14% decline in LVMH's sales in the Asian market (excluding Japan) in the second quarter of 2024, mainly represented by China. The second largest global economy, the country is still dealing with the consequences of the Covid-19 pandemic. In fact, it is one of LVMH's main markets.
On the other hand, Japan showed the opposite performance, with sales increasing by 57% in the second quarter compared to the same period last year; in 2024, the accumulated sales in the country will be 44%. According to a report by LVMH, the reason for the growth is Chinese tourists, who are taking advantage of the devaluation of the Japanese yen.
Shanghai, the largest city in China, is a global financial hub (Photo: reproduction/Leslin_Liu/Pixabay)
Industry perspective
In addition to LVMH, other brands with designer stores are also experiencing declines. For example, Burberry, Hugo Boss, Richemont and Swatch Group reported below expectations for the first half of the year. Burberry, for example, announced that it will report an operating loss for the period if the market remains as it is.
Despite this, LVMH CEO Bernard Arnault is optimistic about the second half of the year: “While remaining vigilant in the current context, the group looks to the second half of the year with confidence”he pointed out. Investors are also betting on growth, with an improvement in the scenario in China and Europe.
Featured Photo: Louis Vuitton is one of the brands belonging to the French holding company (reproduction/Instagram/@louisvuitton)
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Paris Olympics sponsor LVMH faces market instability
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Paris Olympics sponsor LVMH faces market instability
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