Moët and Dior are back in fashion: LVMH's sales are up. What does this mean for the market?

Sales of the global luxury goods market leader LVMH unexpectedly returned to growth in the third quarter: buyers actively spent on Moët & Chandon champagne and Dior fragrances. This may indicate that the luxury goods market is beginning to recover after a prolonged slump, Bloomberg writes.

French group LVMH reported Tuesday that its organic sales (revenue excluding non-recurring factors such as write-downs or acquisitions) rose 1% to €19.1 billion in the third quarter - the first time after two consecutive negative quarters. Moreover, LVMH managed to beat analysts' expectations (€18.2 billion, according to FactSet), writes Barron's.

All of the company's divisions performed better than Wall Street forecasts, including its key fashion and leather goods business: its organic sales fell 2%, and analysts were expecting the worst, Bloomberg notes.

The world's largest luxury goods company, headed by billionaire Bernard Arnault, has been in a prolonged slump, especially felt in China: this region has long been the main driver of growth, writes Bloomberg. However, the situation has now improved: revenue in the region, which includes China, grew 2% last quarter after falling 9% in the first half of the year. Despite macroeconomic uncertainty, demand in the country remains encouraging, LVMH CFO Cecile Cabani said in a call with analysts after the report was published.

The Wine & Spirits division, which had been struggling for two and a half years, showed growth thanks to a restocking of Champagne in the US and good sales of rosé wine. Overall, revenue in the U.S. rose 3%, while Europe and Japan declined 2% and 13%, respectively. Sales in Japan surged last year due to Chinese tourists seeking to take advantage of the weak yen, but the situation is now back to normal, Bloomberg explained.

Kabani warned that the basis for comparison will be less favorable in the fourth quarter than in the third quarter. In contrast, the situation will become more favorable for growth in 2026.

The report was published after the close of trading in Paris, which ended down 1.4%. LVMH securities on the over-the-counter market in the U.S. jumped by 8.8%.

LVMH is traditionally considered to be an indicator of the state of the industry. Therefore, following its securities on the U.S. OTC-market, the securities of other luxury brands rose in price: Kering (owner of Gucci, +5.6%), Hermès (+2.9%) and Richemont (owner of Cartier, +4%).

Morningstar analyst Elena Sokolova said the company still has growth potential in China as "consumers still have significant savings following the pandemic." LVMH's return to growth in the region should have a positive impact on industry sentiment, she added.

"Overall, we see these results as a step in the right direction," said RBC Capital Markets analyst Piral Dadania in a note quoted by Bloomberg.

According to FactSet, LVMH shares have 28 ratings from analysts, and most of them advise to buy the securities: 13 ratings Buy and three Overweight. Another 11 recommend Hold and one recommends Sell (Underweight).

This article was AI-translated and verified by a human editor