LVMH's third quarter suggests the slump in demand has bottomed - triggering a surge in luxury stocks

MW LVMH's third quarter suggests the slump in demand has bottomed - triggering a surge in luxury stocks

By Jules Rimmer

The luxury shifts to rally gear as traders sense an inflection point in the sector's fortunes

LVMH sales to China have demonstrated resilience after several years of decline, showing organic growth of 2% in Asia - helped, no doubt, by the launch in Shanghai of a flagship boutique called "The Louis."

Luxury stocks in Europe surged after third-quarter numbers released Tuesday by sector bellwether LVMH (FR:MC) $(LVMHF)$ returned to growth, demonstrating an unexpected resilience and improved demand in China.

The results, combined with the confident tone struck by management during an analyst call, suggest that consumer demand for luxury items has started to level off.

LVHM's stock spiked as much as 14% in Wednesday trading, and peers like Hermès (FR:RMS), Richemont (CH:CFR), Kering (FR:KER), Burberry (UK:BRBY) and Moncler (IT:MONC) rallied alongside it. Citi's take, a reiteration of its buy recommendation and EUR630 target price from analyst Thomas Chauvet, was that the numbers represent "a ray of hope."

After Brunello Cucinelli bucked the gloomy industry trend with an earnings beat (IT:BC) a fortnight back, these figures may be taken by investors as another signal that the worst may be over for the luxury-goods sector.

Third-quarter sales for the Paris-headquartered LVMH conglomerate, whose brands - its "75 maisons" - include Tiffany, Dior, Louis Vuitton and Moët & Chandon, rose by 1% on a year-on-year basis to EUR19.1 billion, whereas analyst expectations were for a small decline to around EUR18 billion. Fashion and leather goods, the only business segment in contraction, shrank 2%, versus forecasts of a 4% drop and a 9% decline the second quarter, while the wine and spirit divisions eked out 1% growth compared with the forecast 3% contraction.

Kathleen Brooks, a well-known analyst of the luxury sector at brokerage firm XTB, pointed to the rebound in sales to the critical market China as the major bright spot in the earnings announcement. China, in the grip of deflation, had been underperforming for years. LVMH's chief financial officer, Cécile Cabanis, said that she was "encouraged by the pockets of improvement in all businesses" but that, notably, "China is getting very close to stabilization."

Meanwhile, LVMH reported organic sales growth of 3% in the U.S., its other most important geography, which is stabilizing after the uncertainty surrounding tariffs in spring and early summer. The company reported that it was local demand, rather than tourism, driving the sales recovery in most markets.

In his results analysis, Berenberg analyst Nick Anderson commented favorably on management's self-help strategy of investing in its brands, rather than short-term margin protection. He, too, recommends buying the stock and has a EUR570 target price.

So far this year, LVMH has suffered a 20% reduction in analyst consensus earnings-per-share forecasts for 2025 and 2026. Unsurprisingly, then, it has been a 2025 laggard, underperforming the Euro Stoxx 50 XX:SX5E index by roughly 20 percentage points and its sector by 10 percentage points. It's still the third-largest company in Europe by market capitalization, however, and its importance in indicating industry trends is clear from the performance of its peers on Wednesday. The rebound implies the market detects an inflection point.

Of the 20 or so analysts contributing estimates to FactSet, the average target price is EUR577, which is 5% below current levels, and all recommendations are buy or hold. That suggests upgrades are looming.

-Jules Rimmer

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October 15, 2025 08:19 ET (12:19 GMT)

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