European luxury stocks fall after LVMH sales miss

European luxury shares fell on Tuesday, Oct. 13, after LVMH reported a sharper-than-expected drop in fashion and leather goods sales. Weaker Chinese demand for Louis Vuitton raised new doubts about whether the sector can recover from a slowdown now in its third year. In morning trading, LVMH lost 1.6%, Hermès 2.4%, Kering 2%, Moncler 1.5%, Dior Christian Dior SE 1.4% and Richemont Compagnie Financière Richemont SA ↗ 1.60% 1.1%, according to Investing.com.finance.yahoo

The sell-off adds to losses that have built up all year. Reuters reported that the 10 companies in the STOXX Europe Luxury 10 have lost about $350 billion in combined market value since January. LVMH shares are down more than 40% this year, a worse showing than their rivals'.rmb.reuters

A miss in the core division

LVMH reported on Monday that organic sales in fashion and leather goods fell 5% in the third quarter. Analysts surveyed by Visible Alpha had expected a 1.8% decline. The division brings in close to half of the group's revenue. Group organic sales rose 1% to €18.5 billion, short of the 1.3% growth analysts expected. The company blamed a "less buoyant environment" in China. Asia, where China is the largest market, makes up more than a quarter of LVMH's sales.freemalaysiatoday

Watches and jewelry, home to Bulgari and Tiffany, had been one of the sector's few strong areas. Growth there slowed to 6% from 9% in the first half. Sephora led the selective retailing division to 8% organic growth, and wines and spirits rose 6% as champagne sales recovered.finance.yahoo+1

Asked how soon Louis Vuitton might recover, Chief Financial Officer Cécile Cabanis said on the analyst call: "It takes a bit of time, but I don't think there are a lot of shortcuts here". She said the brand has not cut prices and is focusing on longer-term efforts instead.freemalaysiatoday

Analysts lower their targets

Five sell-side analysts have cut their price targets on LVMH by an average of 7%. They expect the miss to point to weak results at competitors as well, Reuters reported in a story carried by Free Malaysia Today. Morningstar lowered its fair value estimate for LVMH from €620 to €590, citing "lower growth and margin pressures near-term." It added that it still expects the company to return to growth over the longer term.global.morningstar+1

"Despite the recent share price weakness, we expect some further pressure on the space as a whole today, with confirmation that the Chinese cluster seems to have taken a material (and bigger than feared) step down," JPMorgan analysts wrote in a note to clients.freemalaysiatoday

China in focus

A year ago, LVMH reported slightly better demand in China, and the whole sector rallied. LVMH's Paris-listed shares are now trading close to their lowest level in more than six years. Chinese spending has been weak since the post-pandemic boom ended, held back by slow economic growth, a property crisis and, more recently, a tax crackdown on wealthy consumers. Since about 2024, the combined market value of the four largest groups, LVMH, Hermès, Kering and Richemont, has nearly halved. Richemont, which is more focused on watches and jewelry, has held up better than the rest.rmb.reuters+1