Burberry (BRBY) Share Price Fell 4.57% on Weak LVMH Q3 Sales

The Burberry Group plc (LON: BRBY) shares fell 4.57% after fellow luxury brand LVMH reported slowing sales growth in its critical American and European markets for luxury goods. The company’s shares fell because it designs and sells luxury fashion goods.

LVMH's shares experienced a significant decline on Wednesday, reaching their lowest level since December. This downturn followed the French luxury group's announcement of slower third-quarter sales growth, highlighting the impact of inflation and economic uncertainties on consumer spending in the post-pandemic era.

Luxury companies face challenges due to a slowdown in China and increased uncertainty caused by rising interest rates in Europe and the United States. LVMH, once Europe's most valuable publicly listed company, saw its shares drop by approximately 6% in early trading, marking its worst performance since March 2020. 

The share prices of other luxury companies, such as Hermes, Kering, Richemont, and Swatch, were also negatively affected. 

LVMH, known for its prestigious brands such as Dior, Louis Vuitton, and Tiffany, reported a third-quarter revenue increase of 9%, which was smaller than expected. This marked a rare miss for the world's largest luxury goods company, which had consistently exceeded expectations with robust double-digit growth in recent years.

LVMH is grappling with reduced demand for high-end products in the United States and Europe, where rising prices have led consumers, particularly younger generations, to curtail their post-pandemic spending. The recovery in China has also been uneven.

JP Morgan wrote in a research note, “LVMH, in our view, remains among the names that should navigate this ongoing volatility relatively better; but with currently negative earnings momentum and an uncertain outlook, we see limited scope for an absolute re-rating in the short-term.”

The slowdown in Europe, where LVMH's sales growth dropped from 19% in the second quarter to 7% in the third quarter, as highlighted by the company during its earnings call, is expected to have broader implications for the industry, according to JP Morgan.

Burberry is set to release its Q2 earnings report on 16 November 2023. Many are eagerly waiting to see how much the company has been affected by the slowing demand for luxury goods. 

The Burberry (BRBY) share price. 

The Burberry share price fell 4.57% to trade at 1753.5p, from Tuesday’s closing price of 1837.5p.