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The world's largest luxury goods group, LVMH, announced its financial report on Tuesday, showing that all major divisions failed to meet analysts' expectations in the third quarter. The quarterly revenue experienced its first decline since the pandemic, and the company's American Depositary Receipts (ADRs) plummeted by 10% on Tuesday. The company stated that the poor performance in the third quarter was mainly due to the strengthening of the yen, leading to a slowdown in growth in the Japanese market.

Key financial data:

Third-quarter revenue: €19.08 billion, a year-on-year decrease of 3%, with analysts expecting €20.05 billion.

Business segment data:

Fashion and Leather Goods: Including high-end brands such as Louis Vuitton and Dior, revenue was €9.15 billion, a year-on-year decline of 5%, below analysts' forecast of €9.67 billion.

Wines and Spirits: Organic sales declined by 7%, while analysts expected a decrease of 2.41%.

Fragrances and Cosmetics division: Organic revenue growth of 5%.

Regional data:

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Third-quarter Asia (excluding the Japanese market): Organic revenue declined by 16%, with analysts expecting a decrease of 13.8%.

Third-quarter Japanese market: Organic revenue grew by 20%, compared to a 57% increase in the previous quarter.Third Quarter U.S. Organic Revenue: Flat, Analysts Expected Growth of 3%.

After the financial results were announced, LVMH's U.S. ADR once plummeted by 10%, with the decline narrowing to around 6%. Other luxury goods stocks, including Ralph Lauren Corporation, Estée Lauder Companies Inc., and Kering SA, the parent company of Gucci, saw significant declines.

The slowdown in global luxury goods demand is affecting the entire industry, with LVMH being considered a barometer for the sector. The company stated that the decline in revenue this quarter was mainly due to the slowdown in Japan's growth, which dropped sharply from a significant leap of 57% in the previous quarter to 20%, according to LVMH. The primary reason is the strengthening of the Japanese yen. RBC Capital Markets analyst Piral Dadhania stated in a report that this result "indicates a slowdown that is more pronounced than expected."

Media reports suggest that against the backdrop of weak global luxury goods demand, Japan emerged as a bright spot for luxury goods companies in the last financial quarter, mainly driven by tourists taking advantage of the weak yen, allowing consumers to purchase luxury goods at lower prices. However, analysts at JPMorgan had previously indicated in a report before the performance release that price increases for luxury brands in Japan and the strengthening of the yen could limit this trend.

Some analysts believe that the consumption boom in the luxury goods industry during the pandemic has come to an end last year, especially for brands under LVMH that target the so-called "aspirational" consumers.

LVMH has over 75 brands, covering the luxury goods sector from fashion and leather goods to watches, jewelry, and travel. Among them, the fashion and fur division accounts for nearly half of LVMH's revenue and contributes nearly three-quarters of its recurring profits. Financial reports show that the division's sales decline in Asia (excluding Japan) has intensified, expanding from a 14% drop in the previous quarter to 16%.

At the same time, both Kering and Burberry have seen double-digit declines in sales in recent quarters, while Hermès has benefited from its more resilient ultra-wealthy customer base. LVMH's stock price has fallen nearly 14% this year, while Kering has dropped 41%, and Hermès has risen by nearly 10%.

Currently, LVMH is undergoing transformation, with Bernard Arnault's five adult children taking on more significant operational roles within the group. LVMH Group's CFO, Guiony, stated that the company will not maintain the status quo and will focus on product innovation, adjusting costs based on "what we see."

Looking ahead, LVMH stated that despite economic uncertainties, the company remains confident.

"In an uncertain economic and geopolitical environment, the group remains confident and will continue to focus on enhancing the appeal of its brands through the authenticity and quality of its products, excellent distribution capabilities, and a flexible organizational structure."