LVMH Shares Fall After Key Fashion Division Misses Sales Estimates

Shares in LVMH Moët Hennessy Louis Vuitton were indicated to fall between 2% and 3% in premarket trading on Tuesday after the luxury goods giant reported second-quarter sales that failed to reassure investors of a robust recovery.

Key Division Underperforms

The company's crucial Fashion and Leather Goods division, which includes brands like Louis Vuitton and Dior and generates the majority of its operating profit, posted a sales increase of 1% when adjusted for currency fluctuations. The division's quarterly sales reached €8.90 billion ($10.12 billion).

While this marked the segment's first quarterly growth in two years, it fell short of the 1.7% rise analysts had forecast. LVMH's overall organic growth for the quarter was 3%, a figure that left investors questioning the strength of the rebound in the luxury market.

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European Weakness Weighs on Results

LVMH attributed the weaker-than-expected performance to a slowdown in spending in Europe, which it linked to a drop in tourism related to the Iran war, according to the report. The miss in the key division immediately became the central point for investors. "All the focus was on FLG," one trader said following the release.

Analysts are now questioning the division's ability to meet full-year targets. Brokerage RBC noted that meeting these goals is necessary "for the stock to start working." The results cast doubt on whether the $400-billion luxury sector is decisively emerging from a two-year downturn. Morningstar analysts added that while trends are turning slightly more positive, "LVMH is still lagging peers."