Oct. 16, 2024 - The European luxury goods index dropped today as Europe's luxury shares slid today following the falling sales of LVMH (LVMHF), the world's leading luxury goods group. The weakened demand from China is the concern as they are considered important consumers in the luxury business.

LVMH fell 7% in early trading and pulled Kering (XPAR:KER) and L'Oreal with it in the process. The company sales reduced by 3 % in a year and failed to meet analyst predictions. Quarterly sales also fell for the first time since the coronavirus outbreak, although year-to-date revenues rose by 16%.

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Sluggish sales especially from China and Japan is suspected to be the culprit. LVMH cited a 14% decline in sales in the region that is prominent in fashion and leather goods businesses from Louis Vuitton and Dior (FRA:DIO). LVMH's survey reported that consumer confidence in China has reached its lowest level since COVID-19 affected countries.

This news comes at a time when there are worries of the slowing economy in China. Some of these factors include lower than expected inflation rates and the current weak housing market.

Currently, the luxury industry has a relatively strong dependence on Chinese consumers: they have stimulated considerable growth in recent years. The recent rise in luxury stocks might be a short-term phenomenon, as some critics have even wondered whether luxury is sustainable when hanging on to the economic condition in a region.

LVMH has started the quarter's earning results on modest results and we can expect the same story from other luxury brands such as Kering, Richemont, and Burberry (LSE:BRBY). Some of these companies might have the same problems primarily because of the relatively low demand in China.

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This article first appeared on GuruFocus.