Why LVMH Moët Hennessy Stock Tumbled on Tuesday

Tuesday's market-moving news for global luxury-goods purveyor LVMH Moët Hennessy (OTC: LVMUY) wasn't very encouraging. After the company published a disappointing revenue update, investors assertively traded out of its stock. At the close of the day's action, it had lost almost 8% of its value. This was a far steeper drop than the 0.9% slide of the S&P 500 index.

Top product category sees sales slump

Well before the opening of the U.S. stock markets, LVMH provided third-quarter, plus six- and nine-month, top-line revenue figures broken down by product category. There were more than a few minus signs in the sections comparing those results to previous periods.

In the company's third quarter, its overall top line fell by 3% year over year to just under 9.2 billion euros ($10 billion), due mainly to a 5% decline in its most critical product category: fashion and leather goods. Softening demand from consumers in China, once a reliably stable group, was a primary reason for the drop. Management also attributed it to lower growth in Japan, another key Asian market.

Uncomfortably, fashion and leather goods is far and away the No. 1 revenue contributor for LVMH; it was responsible for 48% of the company's total for the period. No. 2, selective retailing, was distantly behind at 21%.

Not all product categories saw decreases. Perfumes and cosmetics rose by 3%, while selective retailing booked a 2% gain.

Contending with a more cautious consumer

Business slumps happen all the time, but what's troubling about this is that the slide in fashion and leather goods was LVMH's first since the coronavirus pandemic. Compounding that, analysts tracking the stock had collectively been expecting a slight gain in the category.

No one should push the panic button on LVMH yet; the company is the world's king of luxury goods, with a sprawling product line that keeps it on the throne. That said, it seems that many consumers around the world are being more cautious about their spending, so this might not be the last slump in crucial quarterly metrics for its business.

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