Shares of LVMH were expected to drop between 2% and 3% in premarket trading on Tuesday, following the French luxury goods giant’s release of second-quarter sales figures that failed to reassure investors about a near-term turnaround in its highest-earning business segment.
The company, which owns brands including Louis Vuitton, Dior, and Moet & Chandon champagne, reported that its fashion and leather goods division brought in €8.90 billion (approximately $10.12 billion) in quarterly revenue — a 1% increase after adjusting for currency fluctuations.
While that marked the division’s first quarter of growth in two years, it still came in below what analysts had projected. Forecasts had called for a 1.7% rise. LVMH pointed to softened consumer spending across Europe, where tourism has taken a hit due to the ongoing Iran war.
“All the focus was on FLG,” one trader commented following the release of the results.
Brokerage RBC raised the question of whether the fashion and leather goods segment can hit full-year targets, especially given a more difficult comparison period expected in the third quarter. The firm noted that meeting those targets was essential “for the stock to start working,” in its assessment.
Across the company as a whole, LVMH recorded 3% organic growth for the quarter. That left open the broader question of whether the luxury sector — valued at roughly $400 billion — is truly pulling out of a downturn that has lasted two years.
“Our thesis for LVMH hinges on the recovery in luxury sector performance and the group’s brands overperforming the industry in the long run,” analysts at Morningstar wrote in a note to clients.
“So far, LVMH is still lagging peers, although trends are turning slightly more positive,” the firm added.
($1 = 0.8798 euros)
