LVMH's performance isn't meeting predictions – insights from financial experts
LVMH's Q2 Results: Mixed Bag Amidst Challenging Market Conditions
French luxury conglomerate LVMH reported mixed results for the second quarter of 2025, with some segments performing well and others falling short of expectations.
According to LVMH CEO Bernard Arnault, sales of the Louis Vuitton brand are currently increasing in China. However, the Fashion and Leather Goods division missed expectations, with sales declining by 9 percent to €19.1 billion. This underperformance can be attributed to reduced demand for high-priced handbags and accessories, notably in key markets like Asia and the U.S., as well as declines in tourist spending, particularly in Japan.
Despite this, the division maintained a very high operating margin and showed resilience in local demand in Europe and the U.S. LVMH also experienced solid profitability overall, with an operating margin of 22.6 percent, though profit from recurring operations fell 15 percent and net profit declined 22 percent compared to the prior year.
Analysts and LVMH management appear cautiously optimistic but highlight the challenging economic and geopolitical environment. The company continues focusing on maintaining high margins and operational efficiency, driving growth through innovation, new product launches, and creative leadership changes at maisons such as Louis Vuitton, Christian Dior, Celine, Givenchy, Loewe, and Fendi. LVMH also aims to expand in markets with steady or improving local demand despite weaker tourism and invest in Selective Retailing and Perfumes & Cosmetics.
Thomas Chauvet, a Citi analyst, described LVMH's results as "mixed", noting that LVMH management is addressing structural weaknesses, such as those at Moët Hennessy, and working cost-disciplined. However, Chauvet expressed concern about the potential decline in sales growth for top brands.
Despite the short-term headwinds, Bernard Arnault remains "very optimistic" about the medium-term outlook for LVMH. The Watches and Jewelry segment of LVMH remained stable during the second quarter, contrary to analysts' predictions of a one percent decline. The Selective Retailing segment recorded a four percent increase, and the Perfumes and Cosmetics segment increased by one percent during the second quarter.
The average price target for LVMH is 560.70 euros, according to analysts. Zuzanna Pusz from UBS maintained her "Neutral" rating on LVMH with a price target of 487 euros, praising LVMH's impressive cost control. Jefferies analyst James Grzinic slightly lowered his LVMH price target from 460 to 450 euros. Deutsche Bank lowered its LVMH price target from 535 to 520 euros.
Piral Dadhania from RBC sees sales and EBIT in line with expectations, but the missed growth in Fashion & Leather has created uncertainty. However, Dadhania remains positive about LVMH's long-term prospects, stating that the company's focus on innovation and diversification into other luxury segments will likely help it navigate these headwinds.
In summary, the Fashion and Leather Goods division's missed expectations largely reflect weaker demand from tourists and cooling appetite for luxury handbags and accessories in major markets. However, the division retains strong profitability and innovation momentum. Analysts likely expect LVMH to navigate these headwinds through product innovation, creative reinvention, and diversification into other luxury segments, but some caution remains due to ongoing geopolitical and economic uncertainties.
- Despite the declining sales in the Fashion and Leather Goods division, LVMH remains focused on driving growth through innovative product launches and creative leadership changes in various luxury segments such as fashion, business, and lifestyle.
- In the midst of challenging market conditions, the Watches and Jewelry segment of LVMH remains stable, demonstrating the company's resilience in certain areas of the luxury market, including fashion, finance, and lifestyle.
