Luxury powerhouse LVMH reported an unexpected decline in U.S. sales during the second quarter, signaling a potential slowdown in luxury spending in the country.

CFO Jean-Jacques Guiony attributed the drop in U.S. sales to a decrease in spending by aspirational consumers, who are now showing less interest in entry-level luxury products. He suggested that the fading impact of stimulus payments after the COVID pandemic might be a contributing factor.

However, LVMH’s high-priced goods from its luxury brands are holding up well in the U.S., with wealthier shoppers seemingly less affected by inflation, student debt, and economic uncertainties. The most affected segment in the U.S. market was wine and spirits, particularly cognac, with LVMH struggling to manage inventory issues that impacted pricing and supply during and after the pandemic.

Meanwhile, Europe experienced an 18% increase in LVMH sales during the second quarter, with tourists accounting for almost half of that growth. Many Americans vacationed in Europe, choosing to purchase luxury goods in cities like Paris, Rome, or London rather than the U.S., leading to a slowdown in U.S. luxury sales.

China rises

China presented a contrasting picture, with LVMH reporting a significant 17% rise in sales during the quarter, largely driven by a 34% increase in Asia excluding Japan. Despite signs of a slowing Chinese economy, luxury spending in China remained robust after the lifting of lockdowns last year.

Chinese luxury purchases, which were once primarily made in Europe, are now largely taking place in China and Japan, leading to the expectation of price increases in Japan.