Luxury shares drop amid muted analyst reaction to LVMH sales growth

Investing.com - Shares in luxury firms slipped on Wednesday after sector bellwether LVMH (EPA: LVMH) posted quarterly sales growth that received a tepid reaction from analysts.

Luxury companies have been grappling with a slowdown fueled in part by economic weakness in key market China, although recent results from companies like Cartier-parent Richemont (SIX: CFR) and British fashion house Burberry (LON: BRBY) have bolstered hopes for a turnaround in 2025.

On Tuesday, LVMH, parent of high-end brands like Louis Vuitton and Bulgari, highlighted strong returns in Asia, the U.S., and Europe during the fourth quarter. The regions helped lift organic revenue by 1% in the quarter, beating expectations of a 1.04% decline, according Bloomberg consensus estimates.

Although LVMH’s sales performance improved sequentially -- particularly in fashion and leather goods, which was down by 1% organically in the fourth quarter compared to a 5% decline in the prior quarter -- the pace of the recovery did not match that of its peers or the higher expectations set by investors, analysts at JPMorgan Chase (NYSE: JPM) said.

"We think this confirms that while the sector backdrop is improving, brand and category specific dynamics continue to play an essential role to drive traction with still very discerning consumers," the JPMorgan analysts said in a note, adding that they continue to think the operating environment remains bumpy and does not offer not much growth in the short term.

Analysts at Vital Knowledge also flagged that because Richemont and Burberry posted "blow-out reports", investors will likely "not be shocked" by LVMH's numbers.

In mid-morning European trading on Wednesday, LVMH shares had fallen by more than 5%, dragging down Gucci-owner Kering (EPA: PRTP), outerwear-maker Moncler (BIT: MONC), and cosmetics titan L’Oreal (EPA: OREP). The stock price of Hermes (EPA:HRMS), whose wealthier clients have somewhat insulated it from the broader luxury market's headwinds, was mostly unchanged.

Prior to the start of U.S. trading, meanwhile, shares in beauty groups Estee Lauder (NYSE: EL) and Coty (NYSE: COTY) were lower.

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