The strong sales figures surprise investors and are expected to sustain momentum in luxury stocks
[PARIS/LONDON] LVMH shares had their best day in over two decades on Wednesday (Oct 15) following signs of improved demand in China, which also drove a wider sector rally that added nearly US$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 per cent and was on track for its biggest daily gain since 2001, after reporting better-than-expected third-quarter sales, driven by improved demand in China, a day earlier. Its rivals, including Hermes, Kering, Richemont, Burberry and Moncler, gained between 5 per cent and 9 per cent 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.
Better results expected sector-wide
The quarterly sales rise reported by LVMH, controlled by French billionaire Bernard Arnault, represents the first quarter of growth this year for the company, a bellwether spanning fashion, alcohol and jewellery.
It helped spur a rally that added around US$80 billion to the market capitalisation of firms in the STOXX Europe Luxury 10 index, according to Reuters calculations, 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.
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LVMH’s key fashion and leather goods division, home to Louis Vuitton and Dior, which accounts for over two-thirds of the group’s profit, improved from the previous quarter but sales continued to decline, down 2 per cent, year on year.
The group said that sales in mainland China, a traditional growth driver for the sector, turned positive, and that shoppers were responding well to new store experiences, such as Louis Vuitton’s ship-shaped boutique in Shanghai that opened in June.
Sales from travelling Chinese also improved, but remained negative year on year.
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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 US.
Chinese nationals, who account for around a third of luxury sales globally, drove about 60 per cent of the industry growth between 2000 and 2019, according to estimates from Morgan Stanley.
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.
Sales in Asia, excluding Japan and dominated by China, accounted for 28 per cent of LVMH’s annual turnover last year. However, 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 per cent 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. REUTERS
