LVMH’s first-quarter organic sales fell 3% to €20.3bn, missing market expectations of €21.3bn. All divisions saw sales decline except Watches & Jewellery.
The Fashion & Leather Goods division, which accounts for around half of total sales, saw a 5% decline as falling volumes more than offset higher prices.
The Wines & Spirits division saw the biggest decline, with sales falling 9% (-4% expected). This was driven by weak demand for Cognac in the US and China, as well as a normalisation in demand for champagne.
Despite the weak quarter, LVMH believes it is “well positioned to continue to gain market share”. There is also room to increase production in the US to help mitigate tariff impacts.
The shares fell 7.4% in early trading.
Our view
LVMH had a soft start to 2025, with sales across all of its major divisions falling short of market expectations in the first quarter. Higher prices are doing a lot of the heavy lifting, but they weren’t enough to offset a drop in volumes as the group laps some tough comparable numbers.
LVMH owns a vast stable of powerhouse luxury brands like Christian Dior, Moët and many more. We think this diversity means it’s better placed than many of its peers to ride out the current ups and downs of the luxury market.
The group’s high item price points are supported by what we view as genuine creative and marketing superiority. Being able to charge more means LVMH's operating margins are healthy too, which drips down into free cash flow, ultimately underpinning the group's current ability to pay dividends. However, no dividend is ever guaranteed.
Adept management is a serious asset too. The group's CEO Bernard Arnault, is the group's largest shareholder, which probably explains the focus on long-term success.
No investment comes without risks and we think it's prudent to remember there would be knocks to the valuation as and when Arnault steps down. We have faith it will be well-handled, but given his huge influence, there are likely to be jitters when the day comes.
The debt level is something we’re keeping an eye on. The acquisition of jewellery giant Tiffany stretched the balance sheet, so debt’s sitting higher than we’d like. After a period of investment in the brand, there are strong signs that the turnaround’s beginning to bear fruit, with new collections and renovated stores outperforming other names in the portfolio.
Despite having a large exposure to the US and China, LVMH saw no impact from tariffs on demand in March. While that’s not guaranteed to continue, a lot of its US sales are already manufactured in the country, and the group says it has scope to up production here to soften the blow on future sales. The direct impact of tariffs is limited in our view, but if there is a global recession driven by US tariff policies, we could see demand weaken.
LVMH has an unrivalled stable of world-class brands, which we think will allow it to thrive over the long term. But recent sales weakness and tariff worries have dented sentiment, and the valuation now sits below the long-term average. It could take some time for trading to pick back up, so expect some volatility in the near term.
Environmental, social and governance (ESG) risk
The retail industry is low/medium in terms of ESG risk but varies by subsector. Online retailers are the most exposed, as are companies based in the Asia-Pacific region. The growing demand for transparency and accountability means human rights and environmental risks within supply chains have become a key risk driver. The quality and safety of products as well as their impact on society and the environment are also important considerations.
According to Sustainalytics, LVMH’s management of ESG risks is strong. The group has a board-level committee that oversees the company's social and environmental issues. However, remuneration policies only loosely mention ESG-related performance targets for executives, and its overall ESG reporting falls short of best practice.
LVMH key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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