The trouble started with a flower. Louis Vuitton sued Chinese milk tea chain Molly Tea over its four-petaled logo that it argued looked too much like its famous monogram. The French luxury house won a $1.5 million judgment in June, but the victory sparked backlash in China and may have had an unforeseen cost.
Revenue at LVMH’s fashion and leather goods division, which includes Louis Vuitton, fell to €8.25 billion in the third quarter of 2026 from €8.50 billion a year earlier, according to LVMH’s earnings report. Stripping out currency swings and acquisitions, sales fell 5% as Chinese shoppers pulled back. Luca Solca, managing director of luxury goods at Bernstein, told Fortune the Molly Tea backlash accounted for 2 to 3 percentage points of that decline.
“Without it, for the avoidance of doubt, we could have had -2-3% instead of -5%,” he said.
LVMH was more cautious. On the Oct. 12 earnings call, CFO Cecile Cabanis said it’s “very difficult to size” Molly Tea’s impact, but said it’s “probably fair to say that it had a negative impact at least at the beginning of the quarter.”
The dispute adds to LVMH’s struggles in China, where luxury spending has weakened. Its Asia excluding Japan category—which accounts for 27% of LVMH’s revenue—went from 4% organic sales growth in the second quarter to a 5% decline in the third, according to its earnings report. That contrasts with the U.S., where sales grew 5% in the third quarter.
How a flower sparked backlash
Louis Vuitton sued Molly Tea in May 2025, four years after the milk tea company was founded, claiming it infringed on seven registered trademarks. On June 29, a Chinese court sided with Louis Vuitton and ordered Molly Tea to stop using the design and to pay 10.3 million yuan ($1.5 million) in damages. Molly Tea’s founder Zhang Bocheng said he would appeal the decision.
But the ruling struck a nerve. The state-owned newspaper Beijing Daily questioned why Molly Tea had to pay Louis Vuitton over a floral design with roots in Chinese aesthetics. Some Chinese social media users lobbed similar accusations. The hashtag “LV Accused of Monopolizing Ancient Chinese Patterns” reached Weibo’s top 10 trending topics, according to the Global Times. Another topic about the 10.3 million yuan judgment drew more than 360 million views, while a discussion about Molly Tea’s invalidated trademark drew 18.7 million, according to China Daily.
LVMH and Molly Tea did not respond to Fortune’s requests for comment.
Chinese shoppers are pulling back
Even without the Molly Tea controversy, Louis Vuitton faced a tough market in China. Spending by Chinese customers on LVMH’s fashion and leather goods brands fell by a percentage in the mid-teens in the third quarter compared to the year prior, Cabanis said on the earnings call. She said Chinese shoppers cut spending by “double digits” at home and by a “mid-single-digit” percentage abroad. This helped drive a 5% drop in the division’s global organic sales in the third quarter, following 1% growth in the second, per LVMH’s earnings report.
“The deceleration is obviously largely driven by the Chinese clientele,” Cabanis said.
In an Oct. 13 research note, Morningstar analyst Jelena Sokolova described Chinese demand as “the main drag” on the fashion and leather goods division and wrote that the Molly Tea controversy may have contributed.
But LVMH has rejected suggestions that the trademark dispute is making it retreat from China.
“We are not stopping investing because there was the Molly Tea topic,” Cabanis said.
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