Louis Vuitton (LVMH) sales have missed expectations due to a slowdown in the Chinese market. The world's largest luxury group, which owns Louis Vuitton, Tiffany & Co., and Hennessy, saw its sales rise to 20.98 billion euros ($22.8 billion), marking a modest 1% increase on an organic basis, which excludes currency effects and acquisitions. This is a slowdown from the 3% growth reported in the first quarter and the double-digit growth experienced in 2023 when Chinese consumers splurged on luxury goods after pandemic lockdowns.

In the second quarter, LVMH sales growth slowed as Chinese shoppers cut back on high-end fashion purchases at home. However, demand in Western markets saw a slight uptick.

The report from LVMH, Europe's second-largest listed company with a market value of around 340 billion euros, follows profit warnings from smaller luxury brands like Burberry and Hugo Boss last week.

LVMH sales fell short of the expected 21.6 billion euros, based on an LSEG poll of six analysts. Despite this, the miss was considered manageable by industry analysts. Luca Solca, an analyst at Bernstein, noted, "All in all, this shouldn't be an insurmountable problem, given the minimal size of the miss and the significant pullback the LVMH share price has suffered since the initial post-4Q23 reporting euphoria."

LVMH shares have been volatile due to the luxury market slowdown, dropping about 20% over the past year. Concerns have grown that middle-class shoppers in China are reducing their spending due to a property slump and job insecurity.

Sales in Asia, excluding Japan, fell by 14% in the second quarter, worsening from a 6% drop in the first quarter. However, sales in Japan continued to grow as tourists took advantage of the weak yen.

LVMH's Chief Financial Officer Jean-Jacques Guiony stated that predicting the Chinese market's future is challenging but noted that "the Chinese customer is holding up quite well." He added that many Chinese travelers are still shopping in Japan, indicating a sustained interest in LVMH brands.

The surge in Japanese sales is putting pressure on margins due to lower costs and prices compared to China. For the first half of the year, LVMH reported an operating profit of 10.65 billion euros with an operating margin of 25.6%, down from 27.4% a year ago. This compared to expectations of 11.11 billion euros and a 26.2% margin, according to Visible Alpha.

LVMH's fashion and leather goods division, which includes the Louis Vuitton and Christian Dior brands and represents nearly half of the group's sales and the bulk of its operating profit, grew by 1%, a slight slowdown from the previous quarter's 2% rise.

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