LVMH‘s  sales slowed in the first quarter as rising prices prompted more shoppers who aspire to own its luxury labels to hold back on splashing out thousands of dollars on handbags and other accessories.

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Slower sales growth of 3% reflected comparisons with the same quarter in 2023, when sales were boosted by the lifting of Covid-19 curbs in LVMH’s key market of mainland China and comes amid worries about a prolonged global slowdown which has knocked shares in luxury companies over the past year.

The world’s largest luxury group, owner of Louis Vuitton, Tiffany & Co. and Bulgari, said on Tuesday that sales for the quarter ending in March rose 3% on an organic basis to 20.69 billion euros ($22 billion), matching analyst expectations.

On a reported basis, sales at the group were down 2%, largely due to currency effects.

LVMH, which is Europe’s second-largest listed company and worth nearly 400 billion euros, is the first luxury goods maker to report quarterly earnings, setting the tone as worries grow about demand in China, the world’s No. 2 economy.

Gucci-owner Kering last month issued a surprise warning that first quarter sales would slump 10%, with sharp declines in Asia, casting uncertainty for the sector’s outlook.

LVMH said its Asia sales, excluding Japan, were down 6%, with growth of 2% in both Europe and the United States.

The results were “broadly OK” against the most difficult comparison period of the year, said analysts at Bernstein, and would likely support LVMH’s stock.

Higher growth rates should start to kick-in in the second quarter, they added.

The luxury industry is adjusting to slower demand after a period of stellar sales growth following the pandemic, when shoppers emerged from lockdowns with extra savings and a pent-up desire to treat themselves.

Barclays predicts growth rates will slow to mid single digits this year, down from nearly 9% in 2023 and double digits the previous two years.

Travelling Chinese shoppers are expected to fuel growth, although investors are increasingly nervous about recovery in China itself, where property price falls and youth unemployment have dampened demand for high-end fashion and leather goods.

LVMH Chief Financial Officer Jean-Jacques Guiony said he was “quite happy” with Chinese demand.
Purchases of Louis Vuitton products by Chinese buyers globally grew by around 10%, he said, with an increasing proportion outside mainland China as they resume travelling, particularly in Japan and to some extent in Europe.

LVMH’s fashion and leather goods division, which includes Louis Vuitton and Dior, saw sales climb 2%, matching forecasts.

Sales in the division, which sells small Lady Dior handbags priced at 5,400 euros and roomy Louis Vuitton Speedy bags for 10,000 euros, had risen by 9% year-on-year the previous quarter.

In the U.S, LVMH has seen “continuous strength” from clients at the top end and “very gradual improvement” from aspirational customers, who continue to be impacted by inflation, Guiony said in a call with analysts.

It will take time for these customers to adapt to the higher prices implemented by the industry in recent years, he added.

LVMH, whose activities span spirits, jewellery, cosmetics and fashion and is regarded as a bellwether for the wider luxury goods industry, does not give a breakdown for its brands.

Its shares have been volatile since signs of a luxury slowdown emerged, and are down 11% over the past year.

Shares of Kering, which is revamping Gucci, and Burberry are down 40% and 55%, respectively. Hermes, meanwhile, has outpaced rivals as the ultra-rich continue to splurge on the label’s high-priced Birkin handbags, with shares up 16% over the year.