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Inside Louis Vuitton’s Orlando store in the US – Louis Vuitton<\/p>\n
LVMH on Tuesday reported that sales excluding currency movements and mergers and acquisitions rose 1% in the three months ended September 30, the first increase in revenue this year. Organic sales from the crucial fashion and leather goods division declined 2%, but this was much better than both the 3.5% drop that analysts had expected\u00a0and\u00a0the 9% slump in the second quarter. The shares\u00a0gained as much as 14% in early trading on Wednesday.<\/p>\n
LVMH\u2019s performance underlines that the worst is probably over for luxury. US demand has bounced back from April, when even wealthy shoppers went on a buyers\u2019 strike, driven by the combination of steep increases in the price of handbags and slumping stock markets in the wake of US tariffs. With equities roaring back, Americans are buying more champagne,\u00a0and not just because of stockpiling\u00a0ahead of higher levies. And as the US recovers, the other engine of growth, China, is stabilising, with sales of designer clothes and handbags on the mainland turning positive in the third quarter.<\/p>\n
While LVMH benefited from comparisons with difficult conditions a year ago, its own initiatives are paying off, such as The Louis,\u00a0a store in Shanghai shaped like a ship that\u2019s\u00a0not only proving a tourist attraction but is also boosting luggage sales.\u00a0New designers, including at LVMH\u2019s Dior<\/a> and Celine<\/a> brands,\u00a0are creating excitement around fashion once more.<\/p>\n And the improvements aren\u2019t just coming from price increases. Well<\/a>-heeled shoppers are back- and buying. The more encouraging backdrop explains why luxury stocks have rebounded. Shares in LVMH are up almost 24% in the past six months.<\/p>\n Luxury stocks were clearly oversold earlier in the year amid fears that demand had been permanently dented by so-called ‘greedflation’ by big brands.\u00a0But just as investors then were too gloomy, now they may be getting ahead of themselves.<\/p>\n Aside from some pieces from Demna Gvasalia<\/a>\u2019s first collection for rival Kering<\/a> SA\u2019s Gucci<\/a>– only available for just over two weeks to drive desirability- and LVMH\u2019s Celine, most fashion products shown on the runways won\u2019t appear until early next year.<\/p>\n Meanwhile, sales over the next few months will compare with the final quarter of 2024,\u00a0when exuberance after the US election drove a wave of demand for Cie Financiere Richemont<\/a> SA\u2019s Cartier<\/a> watches and scarves from Britain\u2019s Burberry<\/a> Group Plc.\u00a0<\/p>\n And just as the prospect of tariffs- and resulting equity market declines- put paid to last year\u2019s bounce back, there\u2019s\u00a0a danger that a return of trade tensions, recent wobbles in stocks and crypto currencies\u00a0turning into a deeper rout or an uptick in US unemployment could undermine top-end spending this time around.<\/p>\n But the biggest factor that will determine whether the luxury revival is sustainable\u00a0is China. LVMH said that while domestic sales to Chinese shoppers were now expanding by a percentage in the mid-to-high single digits, their spending abroad- which tends to be more extravagant- is still experiencing a double-digit decline.<\/p>\n Even if a recovery takes hold, it might not be felt evenly across the industry. LVMH, given its considerable scale, should be a winner. It has two of the most talked about new designers- Jonathan Anderson at Dior and Michael Rider at Celine. The company also announced on Tuesday that former Dior designer Maria Grazia Chiuri<\/a> would become the creative director of Fendi<\/a>. It can use its marketing clout to stay at the forefront of consumers\u2019 minds, as the success of The Louis\u00a0shows.<\/p>\n