RBC Capital Markets downgraded LVMH Moët Hennessy Louis Vuitton to 'sector perform' from 'outperform' and significantly cut its 12-month price target from €575 to €475. This decision stems from a challenging macroeconomic environment and softening consumer spending on luxury goods, which RBC expects to continue into fiscal year 2027.
The downgrade is attributed to several factors weighing on consumer spending, including the Middle East conflict, higher oil prices, equity market volatility, and tighter monetary policy. As a result, RBC has made substantial cuts to its financial forecasts for LVMH, lowering its fiscal 2027 earnings-per-share (EPS) estimate by 10% to €23.03, which is 9% below the market consensus.
RBC also reduced its revenue forecast for fiscal 2027 by 4%, now projecting group organic revenue growth of 3.1%, compared to a consensus estimate of 4.6%. The crucial Fashion & Leather Goods division is expected to grow just 1% in fiscal 2027, well below the 4.1% anticipated by the Street. The brokerage also anticipates pressure on LVMH's profitability, forecasting a fiscal 2027 adjusted EBIT margin of 21.7%, 80 basis points below consensus, noting LVMH's high fixed-cost base makes its earnings sensitive to weaker revenue growth. For the upcoming third quarter, RBC forecasts group revenue of €18.30 billion, representing only 1% organic growth, with the Fashion & Leather Goods division projected to decline by 2% organically.
