Workers at Louis Vuitton’s workshops are not at all surprised by LVMH’s setbacks in the third quarter. “For weeks, bags have been piling up in our warehouses, without being shipped. And the management is forcing us to say goodbye now to reduce production.”worries a staff representative of one of the eighteen French factories of the LVMH group’s flagship brand.
Since August, Louis Vuitton subcontractors have also been expecting the same: many are experiencing a drastic drop in the number of hours that the manufacturer buys from them to produce their models. In one of them, Louis Vuitton’s contract collapsed in a few months, reaching a range of 350,000 to 390,000 hours of production by 2024, compared to the 400,000 to 450,000 initially planned at the beginning of the year, according to our information. . Because sales of bags and leather goods, from which Louis Vuitton obtains around 75% of its turnover, are stagnant.
These rare measures respond to an exceptional situation. For the first time since the Covid-19 crisis, global sales of the luxury group, world number one in the sector, fell 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. This evolution is 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 a lot: they generated almost half of LVMH’s global turnover, set at 86.2 billion euros in 2023, and three quarters of its operating profit. However, in the third quarter of 2024, sales for this division fell by 5%, after +1% and +2%, respectively, in the second and first quarters.
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 by consulting firm Bain & Company, sales of handbags and other perfumes increased by more than 10% in 2023. Since the summer of 2024, there has been nothing more. Faced with the real estate crisis, the richest Chinese are saving. The youngest, an exceptional clientele for almost ten years, give up spending for fear of unemployment. Luxury shopping centers are emptying.
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