With a turnover down 3% in the third quarter announced on October 15, the French luxury giant is already taking stock and will be one of the biggest contributors to the overtaxation of large companies planned by the government.
On one side, Chinese consumers who shun Western luxury, on the other a French government which plans a surcharge on large companies. It is in this tense context for the sector that LVMH, the world number 1 in luxury, announced on Tuesday October 15 a turnover down 3% (excluding currency variations, disposals and acquisitions) for the third quarter, at 19.1 billion euros, much stronger than expected.
And it was with a touch of annoyance that the group’s financial director, Jean-Jacques Guiony, responded Tuesday evening to questions from analysts on the corporate tax surcharge provided for in the 2025 draft budget, which should bring in a total of 8 billion euros to the state coffers. LVMH, one of the leading French contributors, has already taken stock. “France represents a third of our profit before tax and 40% of our corporate tax, he explained. The impact of the surcharge on companies will represent an additional 700 to 800 million euros. In France we contribute 0.7% of the French GDP, we pay 4.5% of the total corporate tax and we will pay 10% of the tax surcharge projected by the government, if anyone thinks that we do not contribute to the budgetary effort in preparation”. Note that in 2023, LVMH recorded sales of 86.2 billion euros and a net profit of 15.2 billion euros (+ 8%).
Difficult context
This surcharge comes as LVMH is suffering from the slowdown in the Chinese economy, which has led to a deterioration in its sales since the start of the year: the increase was 3% in the first quarter, then only 1% in the second, before the 3% drop in the third. Over the first nine months of 2024, the group’s turnover is stable in organic growth (0%) compared to 2023, at 60.7 billion, including an increase of 3% in Europe (where it achieves 17% of its sales), 1% in the United States (25% of its sales) and 36% in Japan (9% of sales), but a drop of 12% in Asia, mainly in China, where it achieves 29% of sales. its sales.
LVMH sales in Asia, excluding Japan, worsened over the year, to -6% in the first quarter then -14% in the second and finally -16% in the third. The group, however, speaks of “resilience” of its sales in a difficult context. “Consumption in China has returned to its lowest point during the Covid period, we could not expect an increase in demand in this context, but Chinese consumers’ appetite for luxury remains high,” explains Jean-Jacques Guiony, who says he is confident about a recovery in demand.
“Still far from a plan to stimulate consumption”
Analysts on Saturday scrutinized the announcements of the Chinese Minister of Finance, who promised recovery measures on Saturday, including aid to the real estate sector and banks. But this still not very detailed plan is still considered insufficient to restart the demand of wealthy Chinese for luxury products, before Singles’ Day, November 11, the biggest annual purchasing period in China.
“We are still far from a major plan to stimulate consumption,” commented brokerage Oddo BHF in a note on Monday. According to consulting firm Bain, global sales of high-end personal products – clothing, accessories and beauty products – are expected to increase this year by 0% to 4% compared to the previous year, at constant rates, the weaker since the Covid pandemic.
Bank of America analysts predict the third quarter will be the worst for the sector in four years, with organic sales down 1% from a year earlier. In particular Kering, which will publish its results on October 23, weighed down by its flagship brand Gucci.
