RBC Capital Markets has downgraded LVMH from "Outperform" to "Sector Perform" and slashed its 12-month price target from EUR 575 to EUR 475. The bank believes the current recovery in luxury demand is weaker than previously anticipated, while Middle East conflicts, rising oil prices, stock market volatility, and tighter monetary policy are further suppressing high-end consumption, with this pressure potentially extending into the fiscal 2027 period.
Looking at regional performance, LVMH's first-half growth this year was primarily driven by the United States and Japan. RBC expects that growth in the U.S. market will also gradually decelerate from an elevated base, while other major regions currently lack sufficiently strong recovery momentum, making it difficult for the group's revenue growth to accelerate significantly in the near term.
The most pronounced pressure remains in the core Fashion & Leather Goods division. RBC projects that this segment will post organic revenue growth of just 1% in fiscal 2027, well below the market consensus of 4.1%. Within that forecast, price increases are expected to contribute roughly 2 percentage points, but volumes may decline by about 1%, with essentially no improvement in product mix. Since Fashion & Leather Goods is one of LVMH's largest profit contributors, sluggish growth in this division will directly weigh on the group's overall earnings performance.
Based on a more cautious demand outlook, RBC has lowered its fiscal 2027 revenue estimate for LVMH by 4% and cut its earnings per share forecast by 10% to EUR 23.03, which is approximately 9% below the broader market consensus. The fiscal 2026 EPS estimate was trimmed by 2% to EUR 22.69, while the fiscal 2028 figure was reduced by 12% to EUR 24.30.
RBC now forecasts LVMH's group organic revenue growth at 3.1% for fiscal 2027, lower than the market's 4.6% expectation, with adjusted EBIT margin projected at 21.7%, 80 basis points below consensus. By fiscal 2028, the margin gap versus market expectations could widen further to 120 basis points. The bank notes that LVMH has a high fixed cost base, meaning that once revenue growth slows, the impact on profitability is amplified.
RBC's current fiscal 2027 EPS forecast of EUR 23.03 already implies year-on-year growth of approximately 11%, but achieving that level would still require revenue re-acceleration accompanied by margin improvement, conditions the bank believes lack sufficient support in the current environment. This is also the primary reason behind the valuation downgrade. Based on its fiscal 2027 earnings projection, LVMH currently trades at a price-to-earnings ratio of roughly 17.5 times, higher than the approximately 16 times level adjusted for consensus earnings estimates. RBC believes that with both growth and margin expectations being revised downward simultaneously, the current valuation lacks a foundation for further expansion.
In the near term, third-quarter results will serve as a key test of demand trends. RBC expects LVMH to report third-quarter revenue of EUR 18.3 billion, with organic growth of 1%, approximately 2% below market expectations. Within that, Fashion & Leather Goods revenue is projected at EUR 8.39 billion, declining 2% organically, indicating a further slowdown in the core division compared to the second quarter. In other segments, Wines & Spirits revenue is estimated at EUR 1.31 billion, down 2% organically, with cognac and spirits expected to decline 8%; Watches & Jewelry is projected to grow 8% organically, Perfumes & Cosmetics by 3%, and Selective Retailing by 4%.
Given the weaker earnings outlook, RBC has also reduced its dividend per share forecasts for fiscal 2027 and fiscal 2028, both to EUR 13. Over the longer term, the bank projects LVMH's EPS compound annual growth rate through 2030 at approximately 9%, notably below the average of around 19% seen over the past decade.
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