French luxury products company LVMH Moët Hennessy Louis Vuitton, or LVMH (FR:MC) missed analysts’ expectations in its Q3 results due to softening demand for luxury products in China. LVMH reported a 3% organic decline in revenue, totalling €19.08 billion. This fell short of analysts’ expectations of €19.94 billion and 0.9% organic growth, as compiled by Visible Alpha.
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Following the results, LVMH shares fell by almost 2% on Tuesday. Year-to-date, MC stock has declined by over 13%.
LVMH Results Hint at Stormy Skies for Luxury Market
LVMH is a European fashion house known for its iconic luxury brands like Dior, Louis Vuitton, Sephora, Fendi, Bulgari, and more. The company generally outperforms the broader luxury market with its huge marketing budgets and other advantages over competitors. However, a dip in its sales now indicates greater challenges for the sector, especially for the smaller competitors.
Like LVMH, Italian luxury brand Salvatore Ferragamo S.p.A. (IT:SFER) reported a fall of 7.2% in its Q3 sales yesterday. Ferragamo blamed this slump on difficult trading conditions in Asia and cautioned that its full-year results are expected to reach the lower end of analysts’ forecasts.
China Slowdown Hits LVMH’s Numbers
Regionally, LVMH’s sales in Asia, excluding Japan, dropped by 16% year-over-year in Q3 compared to a 14% decline in the previous quarter. The decline in consumer spending in China continues to challenge LVMH. While a recent set of stimulus measures announced last month has sparked optimism for this crucial market, investors and analysts are split on their potential impact on demand.
Speaking of Japan, LVMH reported that organic revenue growth sharply decelerated to 20% from a 57% increase in the last quarter, primarily due to a stronger yen.
Among its segments, sales in its largest division, Fashion and Leather Goods, declined 5% in the third quarter. Meanwhile, Wines & Spirits business sales fell 7%.
Is LVMH Stock a Good Buy?
Following the results, analysts maintained their ratings on the MC stock, including two Buy recommendations from Bernstein and RBC Capital. On the other hand, UBS reiterated its Hold rating on the stock.
Overall, MC stock has received a Moderate Buy rating on TipRanks, backed by a total of 15 recommendations from analysts. It includes nine Buy and six Hold ratings. The LVMH share price target is €753, which is 20.6% higher than the current trading level.
