Workers in Louis Vuitton workshops are in no way surprised by LVMH’s setbacks in the third quarter. “For weeks, handbags have been accumulating in our warehouses, without being shipped. And management is forcing us to take our leave now to reduce production.”worries a staff representative of one of the eighteen French factories of the flagship brand of the LVMH group.
Since August, Louis Vuitton’s subcontractors have also been expecting this: many are experiencing a drastic drop in the number of hours that the manufacturer buys from them to make its models. At one of them, the Louis Vuitton contract collapsed in a few months, reaching a range of 350,000 to 390,000 hours of production for the year 2024, compared to 400,000 to 450,000 initially planned at the start of the year. year, according to our information. Because sales of handbags and leather goods, from which Louis Vuitton derives around 75% of its turnover, are stalling.
These rare measures respond to an exceptional situation. For the first time since the Covid-19 crisis, overall sales of the luxury group, world number one in the sector, fell by 3%, in the third quarter of 2024, after weak increases of +1% in the second quarter and +3% in the first quarter, according to data published by the group on Tuesday October 15. These developments are below the quarterly forecasts established by financial analysts; most were counting on stability of activity, or even a slight increase.
“It will not be a short crisis”
In the eyes of the financial markets, the health of the fashion and leather goods division is probably the most worrying. Because Louis Vuitton, Dior and other Célines weigh heavily: they generated almost half of LVMH’s global turnover, established at 86.2 billion euros in 2023, and three-quarters of its operating profit. However, in the third quarter of 2024, sales of this division fell by 5%, after + 1% and + 2%, respectively, in the second and first quarters.
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The slippage of the sector leader does not bode well for the last three months of 2024. Especially since the end of the year is always a key period for sales in the United States, the world’s leading luxury market. The country is ahead of China, where, according to estimates from the consulting firm Bain & Company, sales of handbags and other perfumes had further increased by more than 10% in 2023. Since the summer of 2024, it has not nothing more. Faced with the real estate crisis, the richest Chinese are saving. The youngest, an exceptional customer base for almost ten years, are giving up spending for fear of unemployment. Luxury shopping centers are emptying out.
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