Louis Vuitton, Gucci owners face tough times in China amid trade war, property slump

BEIJING: The world’s biggest luxury groups will continue to face challenges in China as the trade war with the US weighs on economic growth and dampens already sluggish demand, according to analysts.

An ongoing slump in China’s property market was not helping consumer sentiment either, they added. China’s new-home prices fell 0.1 per cent in March, a 22nd straight month of decline, according to official data.

LVMH, owner of Louis Vuitton and Christian Dior, posted a 3 per cent decline in first-quarter sales to €20.3 billion (US$23 billion), losing its crown as Europe’s largest luxury group to rival Hermes.

Sales across all divisions declined except watches and jewellery, while weaker cognac demand in China and the US led to a 9 per cent sales drop – the steepest across all categories – in its wine and spirits unit.

The results reflected the continuing decline in luxury spending in China, which fell around 18 to 20 per cent last year, according to a report by Bain & Co in January.

“The start of the year has been weak for LVMH with Chinese consumers, specifically because of less travel and spending in Japan versus last year, which was helped by a weak yen,” said Jelena Sokolova, a senior equity analyst at Morningstar.

She added that spending was held back by falling property prices, which were “crucial to luxury consumer sentiment”, while uncertainties around the trade war with the US could further pressure equity markets and dampen China’s economic growth.