LVMH, the owner of brands like Louis Vuitton and Dior, has seen its shares fall considerably, nearing six-year lows and losing about 30% of their value this year. This decline reflects investor unease about the pace of recovery in luxury demand, despite the company reporting its fashion and leather goods division grew 1% organically in the second quarter to 8.90 billion euros ($10.12 billion) – its first quarterly increase in two years. However, this growth still missed analyst expectations of 1.7%, and some strategists suggest it was driven more by pricing discipline than actual demand improvement.
Overall, LVMH reported organic sales growth of 3% for the quarter, boosted by an 11% increase in its watches and jewelry division. Other segments like wines and spirits grew 5%, and selective retailing (including Sephora) grew 6%. Despite these mixed results, analysts from UBS noted the results were “decent, but unlikely to change the debate,” leading several brokerages, including RBC and Morgan Stanley, to cut their target prices for LVMH. Morningstar analyst Jelena Sokolova acknowledged positive trends but noted LVMH lagged some rivals and cited geopolitical conflicts, like the Israel-Iran conflict, impacting tourism spending in Europe.
The broader European luxury sector is also experiencing a downturn, with the STOXX Europe Luxury 10 index hitting nearly three-month lows and a 19% year-to-date decline. LVMH shares specifically reached a five-year low after Bernstein lowered its luxury-sector growth forecasts, citing a significant deceleration in Chinese luxury spending, with July seeing a 12% fall in mall sales data. Bernstein described this as the fourth “false dawn” for Chinese luxury spending recovery since the pandemic, leading them to reduce LVMH’s organic sales growth forecasts for 2026 and 2027, as well as earnings-per-share estimates.
Analysts emphasize that luxury brands must now focus on retaining and engaging ultra-wealthy clients (VICs), who account for a significant portion of global expenditure, through sustained relevance and increased innovation. This shift is critical as aspirational consumers are being squeezed by economic pressures. The industry is also seeing a trend where consumers prioritize experiences over tangible goods, prompting LVMH to expand its cultural offerings. The overall sentiment remains cautious due to a difficult comparison base for the second half of the year and ongoing macro and geopolitical challenges.
