Shares in LVMH dropped 8% on Tuesday morning after the French luxury giant reported an unexpected fall in first-quarter sales, triggering a sharp reaction across the European luxury sector.
LVMH, which owns flagship brands including Louis Vuitton, Moët & Chandon and Hennessy, reported a 3% year-on-year decline in revenue for the first three months of the year, according to a trading update published after markets closed on Monday.
The results missed consensus analyst expectations, which had anticipated slight growth, and fell short even of the most conservative forecasts among institutional investors.
The downturn was led by a 9% plunge in the wines and spirits division, where sales of cognac—an iconic product in the group’s portfolio—declined amid softer demand from both the US and China.
The company attributed this partly to economic uncertainty but also to geopolitical tensions that have seen cognac caught in the crossfire of trade disputes.
Fashion and leather goods, traditionally LVMH’s most resilient segment, recorded a 5% revenue dip.
Watch sales were flat, offering no relief from the broader weakness in consumer appetite for luxury products.
Wider sector under pressure; Kering, Burberry, Richemont fall too
The disappointing figures from LVMH dragged down peers across the sector.
Shares in Kering, the parent company of Gucci, fell 2.5%, while British fashion house Burberry slipped 4.2%.
Richemont, known for Cartier and Montblanc, was down 2.26% in early trading. The broader European market, in contrast, traded higher, underscoring the specific pressure facing luxury firms.
Analysts at Citi said there was “not much to cheer” in LVMH’s earnings, noting that the results were “overall below the most conservative buyside expectations.”
They suggested it was hard to see a rebound in the second or third quarters given elevated uncertainty in the global economy.
Jefferies cut its target price on LVMH from 670 euros to 510 euros, pointing to ongoing demand softness and an unpredictable macro backdrop.
Trade instability clouds outlook despite pricing power
LVMH’s Chief Financial Officer Cecile Cabanis told analysts during a call that trade tensions were making it increasingly difficult to plan, with key variables “changing every hour.”
The comment came amid fresh uncertainty over US tariffs, following mixed signals from President Donald Trump on trade policy.
Luxury brands are generally seen as more insulated than mass-market retailers due to their pricing power and loyal customer base.
However, analysts have warned that the risk of a broader economic downturn—especially one sparked by tariffs—could dent even high-end demand, particularly in major markets like the US and China.
Bernstein analyst Luca Solca recenly sharply revised his forecast for global luxury sales, projecting a 2% decline this year compared to an earlier estimate of 5% growth.
He said the shift reflected a self-fulfilling cycle of market turmoil and weakening consumer sentiment.
Solca also downgraded his earnings forecast for the sector, now expecting average EBIT to fall between 4% and 6% compared to 2024.
Despite the gloom, he said luxury firms were still better placed than most to navigate a period of disruption.
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