Sluggish Chinese demand weighs on LVMH, as Louis Vuitton’s Molly Tea case casts a shadow
The world’s largest luxury group LVMH said Asia, excluding Japan, was the only region to suffer falling sales in the third quarter ending September and the biggest drag was a mid-teens slowdown in Chinese demand, amid a less buoyant macroeconomic environment. The Louis Vuitton, Dior, Bvlgari and Fendi’s parent group said Asia took a hit from a sharp macro-led deterioration in Chinese consumer…
LVMH, the world's largest luxury group, reported a slowdown in sales in Asia, excluding Japan, during the third quarter ending September, with China being the biggest contributor to the decline. The main reason for the slump was a sharp decline in consumer sentiment in China, impacting discretionary spending on luxury items. Louis Vuitton, Dior, Bvlgari and Fendi's parent group suffered from a mid-teens slowdown in Chinese demand due to a deteriorating macroeconomic environment, according to the company's earnings call on Monday.
The sluggish demand in China coincided with a series of trademark lawsuits filed by Louis Vuitton in the country. In one case, a Chinese court ordered the local tea chain Molly Tea to pay the brand 10.3 million yuan (US$1.5 million) in July over the use of a similar logo. While it is difficult to quantify the exact impact of this lawsuit, it likely had a negative effect on the company's performance at the beginning of the quarter, as noted by LVMH's CFO Cecile Cabanis.
The negative news flow in China over the summer further contributed to a subdued atmosphere and a challenging environment for luxury brands, she added.
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