LVMH

Company Update:
LVMH’s Q3 sales were in line with consensus at Group level, but the divisional mix was weaker than expected. Fashion & Leather Goods declined 5% organically vs consensus of −2%. The weakness was not uniform across Fashion & Leather Goods, with Dior showing encouraging momentum, while Celine, Loro Piana and Rimowa also performed relatively well.

Elsewhere, Sephora remained a bright spot, driving 8% organic growth in Selective Retailing, while Wines & Spirits continued to recover (+6%). 

Management attributed the weakness mainly to a more challenging Chinese consumer backdrop amid macro pressure. Chinese client spending fell mid-teens, with onshore spending down double digits, despite improving trends in Europe and continued resilience in the US.

Louis Vuitton performed below the division average, affected by a logistics disruption. Management also acknowledged that the Molly Tea controversy negatively impacted the brand early in the quarter.

Looking ahead, macro pressure in China remains a concern, while Watches & Jewelry faces tougher Q4 comparables, particularly at Bulgari. Cost efficiency remains a priority, but management cautioned that savings may not fully offset revenue pressure, suggesting further pressure on H2 margins. Moreover, management indicated that FX will remain a drag on H2 margins despite turning positive at the sales level.

The US-listed ADR ended down 2.5% yesterday, and we expect a negative reaction this morning as the consensus adjusts down 2026 estimates. However, we expect the adjustment will be limited at least for 2026 (c 1% in sales, 3% to 5% at EBIT level and 3-6% at the EPS level). The key question is what about 2027 as the consensus still expects an improvement in Leather and fashion, recovery that could very well be delayed.

Still, LVMH is back at attractive levels, in my opinion, even if the recovery is delayed to H2 27 or later. The drop in EURUSD to 1.117 is a positive for LVMH and the recovery in Wine and Spirit also bodes well. LVMH remains a superb diversified company, which now trades at a sharp discount to peers (despite arguably better intrinsic quality).  






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