A sign on the exterior of a Louis Vuitton luxury boutique operated by LVMH Moet Hennessy Louis SE is pictured in Paris, France, January 25, 2024.
Benoit Tessier | Reuters
Shares of LVMH dropped Tuesday after it flagged a hit to sales from the Iran war, overshadowing underlying improvements.
The luxury conglomerate missed sales expectations with organic growth in the quarter amounting to 1%, missing FactSet estimates of 1.5%.
LVMH also flagged a 1% negative impact from the Iran war in the quarter.
“When the conflict started, and in the month of March, there was a shortfall and a deterioration of demand between 30% and 70%, depending on the malls, depending on the businesses,” LVMH CFO Cécile Cabanis said on a call with analysts late Monday, referring to the Middle East region which accounts for about 6% of group sales.
It’s “anybody’s guess” what the outcome of the conflict will be, Cabanis said. “What we have not seen yet is repatriation, and what we know is that the wealth has not evaporated, so there will be a time where we’ll see that coming, probably elsewhere, and mitigate the impact, should the conflict continue.”
“Party postponed,” said Berstein analyst Luca Solca in a note. The luxury sector had begun to show signs of recovery after a years-long slump prompted by soft demand from Chinese consumers, formerly one of the sector’s main growth drivers.
Even if results were better than a year ago, “this is likely not enough to convince investors to step off the fence,” Solca said. In the first quarter of 2025, overall organic sales declined by 3%.
LVMH stock fell 0.7% in morning trading in Paris, adding to a 27% loss year-to-date. The pan-European blue-chip Stoxx 600 index rose 0.7% amid hopes that U.S.-Iran peace talks could resume following the U.S. blockade of the Strait of Hormuz.
LVMH shares year-to-date.
“The most important nationalities supporting luxury goods spend — the Chinese and the Americans — are improving and staying strong,” Solca told CNBC’s “Europe Early Edition” on Tuesday.
Organic sales declined by 3% in Europe and Japan, respectively, in the quarter, while sales in the U.S. grew by 3%. Asia excluding Japan grew 7%.
Estimates cut
Several analysts cut their price targets on LVMH shares following the report. Solca cut his target to 600 euros ($707) from 685 euros, maintaining an Outperform rating as the company is “improving where it matters.”
The company’s fashion and leather goods division, which brings in the bulk of its profits, saw sales decline by 2%. The division would have seen “flattish” growth if it hadn’t been for the Middle East conflict, CFO Cabanis said.
LVMH management highlighted momentum for key brands Louis Vuitton and Dior, and progress on “newness” and creative revival, which includes the appointment of Jonathan Anderson as creative director of Dior last year.
“LVMH’s slight miss in Fashion&Leather is likely to set a prudent tone for the reporting season,” said Citi analysts as they reiterated their price target on shares at 621 euros, cut from 664 euros in March.
“The main uncertainty is the Middle East conflict’s impact on macro conditions, consumer confidence, and global tourist flows,” they said, however, they still maintain a positive stance on the stock in a sector still out of favor.
Jefferies analysts cut their price target to 510 euros from 610 euros, saying that the company’s gradual progress was overshadowed by Middle East dilution.
