Shares of luxury giant LVMH took a sharp dive as much as 8% on Tuesday, ceding ground to Hermès as the world’s leading luxury company, following an unexpected downturn in first-quarter sales. In the wake of its recent earnings report, LVMH revealed a 3% drop in sales year-on-year, falling short of analysts’ predictions for modest growth. This disappointing performance set off ripples throughout the luxury industry, with key companies such as Kering and Burberry also experiencing declines in their stock values.
At one point during trading, Hermès’ market capitalization eclipsed that of LVMH, nudged by only a modest 0.34% drop in Hermès shares compared to LVMH’s 7.3% decline by 11:45 a.m. in London. CNBC’s analysis of Reuters data indicated LVMH’s current market value at 245.6 billion euros ($278.5 billion), a hair’s breadth above Hermès. Thus, LVMH’s reign as Europe’s most valuable company—a position it had maintained since 2021—was momentarily disrupted, first by Novo Nordisk in 2023 and more recently by SAP in March 2025.
The most significant contributor to LVMH’s sales slump was its wines and spirits segment, which suffered a 9% decline, partially attributed to softer demand in the crucial markets of the U.S. and China, areas fraught with geopolitical tensions. The fashion and leather goods division, a vital part of LVMH which comprised 78% of its profit last year, saw sales decrease by 5%, and watch sales remained stagnant. A geographical breakdown shows Europe as the sole bright spot, reporting a 2% organic growth, while other regions like Asia (excluding Japan) saw an 11% downturn, with U.S. and Japan sales dropping 3% and 1%, respectively.
In light of these numbers, Citi analysts Thomas Chauvet and Mahesh Mohankumar indicated a lack of optimism, stating that sales fell “below the most conservative buyside expectations.” They highlighted the challenges for LVMH and the broader luxury sector, emphasizing the difficulties in forecasting revenue improvements amid ongoing economic instability. Adding to the uncertainty, Jefferies revised its price target for LVMH to 510 euros ($578.62), down from 670 euros.
The luxury sector is currently navigating numerous obstacles, not least stemming from the trade policies under U.S. President Donald Trump’s administration. LVMH, which counts Louis Vuitton and Moët & Chandon among its prestigious brands, stands as the first European luxury firm to release quarterly earnings since Trump’s announcement—and subsequent delay—of imposing reciprocal tariffs.
Investors await LVMH’s insights on how tariffs may influence their costs and demand levels going forward. LVMH CFO Cecile Cabanis, while affirming steady growth over the past six months, admitted that aspirational consumers might be affected by economic uncertainties. However, she did not detail specific pricing strategies for the upcoming quarter, suggesting instead that they might adjust prices to counterbalance inflationary pressures. Despite its resilience, the luxury market is not immune to the projected economic downturn from tariffs, particularly in the critical U.S. and China markets, delaying recovery in an industry already grappling with long-standing challenges.
Analysts caution that while luxury brands can generally pass added costs to affluent customers, a tariff-driven economic slowdown could further suppress demand, prolonging the sector’s road to recovery from its recent struggles.
Original Source: https://www.cnbc.com/2025/04/15/lvmh-sales-miss-as-tariff-uncertainty-threatens-to-hit-wealthy-shoppers.html
Category :
Tags:
Publish Date: 2025-04-15 16:22:00
