Thomas Lyons 
Luxury shoppers in the US are showing a decline in purchases of high-end fashion and leather goods, according to LVMH’s first-quarter sales report. This adds to the evidence that the strong post-pandemic splurge that has been ongoing for months may be coming to an end. LVMH, Europe’s most valuable listed company, saw a 17% jump in sales, causing shares to rise nearly 5% to record highs in trading yesterday. The sharp rebound in China following the end of covid-19 lockdowns contributed to this growth. US revenue grew 8% over the quarter, but LVMH’s finance chief Jean-Jacques Guiony stated that most of that was due to brisk business at its less exclusive Sephora beauty chain.
Guiony also stated that “For the rest, the business is slowing down a bit,” citing softer demand for fashion and leather goods, where sales to US shoppers both at home and abroad were “flattish,” as well as jewellery. It is possible that interest rate rises are taking their toll on spending. European labels, including LVMH’s Louis Vuitton and Dior, Chanel, and Hermes, have been experiencing strong demand from Americans who emerged from lockdowns with savings and a desire to splurge on designer labels. LVMH’s US sales grew 15% last year, and the US market accounted for 27% of overall revenue, as shoppers shrugged off rising prices and turbulent markets.
The high demand prompted a flurry of investments, with brands including rivals Hermes and Kering-owned Gucci opening new retail spaces in sprawling malls. However, the spending spree from shoppers is beginning to show signs of slowing. LVMH saw a particular slowdown in US demand for its Hennessy cognac, as a steep price increase meant to offset rising energy and glass costs were “probably a bit difficult to absorb by some clients,” according to Guiony. He added that the group was taking a cautious approach to price increases this year, not just for cognac.
LVMH will soon show off a hefty investment in US jewellery group Tiffany, which it bought for $16bn in 2021, with the reopening of the New York flagship store after three years of renovation. The store, which accounted for about 10% of Tiffany sales before closing for the refurbishment, is likely to reopen near the end of the month. LVMH’s luxury divisions, which span fashion, leather goods, watches, and jewellery, have been gaining on rivals in recent years, almost doubling their global market share to 22% from 12% between 2018-2023. Many high-end labels are still moving further upmarket and rolling out new services for their wealthiest clients, seen as more resilient to economic headwinds.
Gucci, for example, opened a salon catering to high-end clients in Melrose Place in Los Angeles, where red carpet-ready evening wear is displayed on mirrored pedestals. The group plans to open nine more similar boutiques, including in New York and Shanghai. It remains to be seen how the market for luxury goods will develop in the coming months as the global economy continues to recover from the pandemic.
