LVMH (EU:MC) shares were expected to open between 2% and 3% lower on Tuesday after the luxury goods group released second-quarter sales figures that left investors unconvinced about the pace of recovery in its most profitable business.
The owner of brands including Louis Vuitton, Dior and Moët & Chandon reported that revenue from its Fashion & Leather Goods division rose 1% on a currency-adjusted basis to €8.90 billion ($10.12 billion). While this marked the division’s first quarter of growth in two years, the result fell short of analysts’ expectations for a 1.7% increase.
The company pointed to softer consumer spending in Europe, where tourism has been affected by the conflict involving Iran, reducing demand in one of its key luxury markets.
“All the focus was on FLG,” a trader said following the results.
Analysts at RBC said the key issue is whether the Fashion & Leather Goods business can still achieve full-year expectations despite facing more demanding year-on-year comparisons in the third quarter. The brokerage added that this would be necessary “for the stock to start working” in its assessment.
Across the group, LVMH delivered 3% organic sales growth during the quarter. However, the results did little to settle concerns over whether the luxury sector is moving convincingly beyond the downturn that has weighed on the industry over the past two years.
“Our thesis for LVMH hinges on the recovery in luxury sector performance and the group’s brands overperforming the industry in the long run,” Morningstar analysts said in a note to clients.
“So far, LVMH is still lagging peers, although trends are turning slightly more positive,” the brokerage added.
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