LVMH shares had their best day in over two decades on Wednesday following signs of improved demand in China, which also drove a wider sector rally that added nearly $80 billion to European luxury stocks’ valuations.
The world’s top luxury group, which owns brands ranging from Louis Vuitton bags to Moet champagne, soared as much as 14% and was on track for its biggest daily gain since 2001, after it beat forecasts, reporting its first quarterly sales rise this year a day earlier.
Its rivals, including Hermes, Kering, Richemont, Burberry and Moncler, gained between 5% and 9% on investor hopes that the industry is pulling out of its two-year slump.
The sales figures “indeed surprised investors positively and are likely to keep the sector’s share price momentum alive,” said Stefan Bauknecht, equity portfolio manager at DWS.
Bernstein highlighted that sales exceeded expectations across all divisions, which span beauty, jewellery, fashion, spirits and hotels.
While analysts said that it boded well for continued recovery, several of them warned that it was too early to talk about a general rebound, with Jefferies asking whether the early signs from LVMH were being confused for a broader industry recovery.
BETTER RESULTS EXPECTED SECTOR-WIDE
calculations show that the rally spurred by the industry bellwether controlled by French billionaire Bernard Arnault added around $80 billion to the market capitalisation of firms in the STOXX Europe Luxury 10 index, outpacing the last big buying spree for the sector in early 2024.
Luxury sector shares had begun getting some traction in recent weeks, with expectations that sweeping management and creative overhauls will bear fruit.
Sales in mainland China, a traditional growth driver for the sector, turned positive, with shoppers responding well to new store experiences, such as Louis Vuitton’s ship-shaped boutique in Shanghai. Sales from travelling Chinese also improved, but remained negative year-on-year.
Chinese appetite for luxury goods has been dampened by a property crisis, compounding overall gloom in the sector, which has also been buffeted by the impact of the trade war and economic uncertainty in its other key market, the United States.
Chinese nationals account for around a third of global luxury sales at LVMH as well as for the sector as a whole.
RETURN TO GROWTH REASSURES INVESTORS
Third-quarter sales were reassuring, said Ariane Hayate, European equity fund manager at Edmond de Rothschild, citing improvements from “idiosyncratic” elements, such as Louis Vuitton’s initiatives driving growth in China.
LVMH’s fashion and leather goods division, the group profit driver, improved from the previous quarter but sales still declined 2% year-on-year.
LVMH Chief Financial Officer Cecile Cabanis warned on Tuesday economic uncertainty and unfavourable exchange rates would continue to affect its business in the fourth quarter.
UBS, which forecasts 4% organic sales growth next year for the sector, expects an acceleration only in the second half of 2026, with collections from new designers entering stores starting in the second quarter.
($1 = 0.8602 euros)
(Reporting by Alun John, Mateusz Rabiea, Mimosa Spencer, Tassilo Hummel and Anna Pruchnicka)
