European luxury shares moved higher on Tuesday after LVMH (EU:MC) reported stronger second-quarter sales growth and confirmed that its flagship Fashion & Leather Goods division returned to positive growth, providing fresh optimism for a sector that has faced subdued consumer demand over the past two years.
By 08:11 GMT, Kering (EU:KER) had gained around 2%, while Hermès (LSE:RMS) and L’Oréal (EU:OR) posted more modest gains of less than 1%.
Despite the positive sector reaction, LVMH shares reversed earlier gains to trade around 1.5% lower, as investors remained unconvinced that the improvement marked the beginning of a sustained recovery in the group’s most profitable business.
The luxury group, which owns brands including Louis Vuitton and Dior and is widely regarded as a benchmark for the industry, generated second-quarter revenue of €19.52 billion. Organic sales increased 3% compared with the same period last year, improving on the 1% growth recorded during the first quarter and exceeding analysts’ expectations of €19.45 billion, according to a Visible Alpha survey.
LVMH’s Fashion & Leather Goods division reported quarterly revenue of €8.9 billion, representing a 1% increase from a year earlier. The result marked a significant improvement from the 2% decline recorded in the previous quarter and ended several consecutive quarters of falling sales. However, the performance remained below analysts’ expectations for growth of 1.7%, with the company citing softer consumer spending across Europe as tourism was affected by the conflict involving Iran.
Analysts at RBC Capital Markets said the main challenge now is whether the division can deliver full-year expectations despite more demanding comparisons in the third quarter, adding that achieving this would be necessary “for the stock to start working.”
LVMH, led by Chairman and Chief Executive Bernard Arnault, said geopolitical and economic uncertainty has intensified as a result of the conflict in the Middle East.
Excluding the effects of the conflict, second-quarter revenue increased by 4%.
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