LVMH reported a 3% year-on-year decline in first-quarter sales, missing expectations and triggering a 7.8% share plunge that allowed Hermès to surpass it as the world's most valuable luxury company by market capitalization.
Sales Miss and Stock Plunge
- LVMH's Q1 2025 sales fell 3% compared to the same period last year, contrary to analyst forecasts for slight growth.
- Shares dropped 7.8% in the worst session since March 2020, dragging down the broader luxury sector.
- Hermès' market capitalization reached 246.4 billion euros, edging out LVMH's 244.1 billion euros based on FactSet data.
Regional and Division Performance
- Wines and spirits: Revenue declined 9% due to weaker demand in the U.S. and China for cognac.
- Fashion and leather goods: Slid 5%; this division accounted for 78% of profit in 2024.
- Watches: Sales were flat.
- Regional breakdown:
- Europe: Up 2% organically.
- Asia excluding Japan: Down 11%.
- U.S.: Down 3%.
- Japan: Down 1%.
Analyst and Executive Comments
- Citi analysts described the results as having "not much to cheer for," with sales below conservative expectations and limited visibility for sequential improvement.
- Bank of America Global Research noted that short-term fundamentals remain tough, requiring a macro surprise for positive catalysts.
- LVMH CFO Cecile Cabanis indicated no major trend change in Q1 but highlighted vulnerability among aspirational clientele, particularly in wines, spirits, and beauty, and mentioned potential repricing to offset inflation or currency swings.
Tariff and Economic Headwinds
- The luxury sector faces pressure from U.S. President Donald Trump's volatile trade policy, including delayed reciprocal tariffs.
- While luxury brands may pass costs to wealthy consumers, analysts warn that tariff-induced economic downturns could severely impact demand in key markets like the U.S. and China, prolonging the sector's recovery.