Investors have been looking to LVMH Moet Hennessy Louis Vuitton SE for a read on just how bad the luxury slump is turning out to be. On Tuesday night, they got it. And it was even worse than they’d feared.

Bernard Arnault’s mighty LVMH hasn’t escaped the bursting of the bling bubble. The owner of Louis Vuitton and Dior reported its first decline in sales since the pandemic, excluding currency movements and mergers and acquisitions. Sales at the crucial fashion and leather goods division fell 5% in the three months to the end of September, far below the Bloomberg consensus of analysts’ expectations for a slight gain.

But the company is likely to emerge less scathed than many rivals.

The purveyors of top-end goods are being buffeted from all sides.

The main culprit is China, where demand has deteriorated markedly over the past three months as confidence has sunk to Covid-era lows. Sales of fashion and leather goods to mainland Chinese consumers fell by a percentage in the mid-single-digits in the third quarter, LVMH Chief Financial Officer Jean-Jacques Guiony said. In July, he had pointed to mid- to high-single-digit growth from this cohort.

Though many Chinese consumers had been traveling to Japan to shop, a stronger yen meant this carry trade wasn’t so appealing. Organic sales from Asia excluding Japan fell 16% in the third quarter.

Guiony did point to a slight improvement in demand for fashion and leather goods in the US, where consumers have also cut back, as well as in Europe.

Still, with costs inevitably expanding in the boom years, profit margins are likely to come under pressure. Little wonder then that LVMH shares fell as much as 7.5% on Wednesday. They are down by about a third since mid-March. When the full slate of third-quarter earnings is in, the conglomerate might not be in the lead — that is likely to be Hermes International SCA and possibly Prada SpA. But its unlikely to be one of the laggards either. Underlining the gap between the winners and losers, Salvatore Ferragamo SpA, which is in the midst of a turnaround, said it expected its full-year operating profit to be at the lowest end of analysts’ expectations.

LVMH has some divisions that are more exposed to the current downturn, such as wines and spirits. Even beauty demand is slowing after blockbuster growth over the past few years.

But LVMH owns two of the industry’s biggest brands, Louis Vuitton and Dior. When times are tough, consumers typically gravitate to the names they know best. While Dior is slowing — it performed slightly below the average— Vuitton is holding up, with sales slightly above the average.

The group is also taking steps to defend its position. Shaking up its portfolio — with the sale of the Off-White streetwear brand, and new designers at its Celine house, Fendi womenswear and Givenchy — shows the company is not content to rest on its considerable laurels. It is developing new products to entice customers, though Guiony warned that introducing a new range of very affordable products would be a “mistake”.

The group will also cut some costs where it can. For example, the bulk of investment in new stores will be confined to its Tiffany & Co. jewelry division.

LVMH might also be able to take advantage if rivals are less able to compete. Even with the global luxury downturn, it is expected to generate about €85 billion ($92.5 billion) this year. That financial firepower means it can keep its brands at the forefront of consumers’ minds, through, for example, its recent sponsorship of Formula One, which could be worth close to $1 billion.

There could even be opportunities to employ its strong balance sheet to invest in areas where LVMH still has white space, such as watches and jewelry, skincare and hospitality.

The danger is that things get worse before they get better. The US presidential election has the capacity to unsettle shoppers, while recent Chinese stimulus measures might not be as helpful as hoped. Tariffs on luxury goods after a trade spat with China are another risk, while LVMH could pay up to an extra €800 million of tax next year after France announced plans to raise levies on its biggest companies.

But, it’s now been a year since the point when top-end demand started to cool, meaning that annual comparisons will be easier. The Chinese stimulus might reignite demand, while Guiony said he saw no reason to believe the current downturn in the country reflected a structural move away from top-end goods.

If that’s the case, then for long-term investors, the luxury storm might have a silver lining.