It’s been a bruising earnings season for the luxury sector, with LVMH Moët Hennessy Louis Vuitton, Kering and Hermès International all missing consensus revenue expectations for the first quarter of the year.
Over the past week, equity analysts at HSBC, TD Cowen and Barclays downgraded LVMH from buy to hold, citing incremental headwinds due to falling consumer sentiment, wealth destruction, an unfavorable exchange rate environment, and particular challenges in China and the U.S., currently embroiled in a trade war.
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“Because of the U.S. tariff news flow — weaker GDP growth forecasts, risk of recession in the U.S. from Q3, weaker consumer sentiment — we think the sector’s earnings recovery story, which we expected in H2 of 2025, could be pushed back to a later time frame,” Barclays analyst Carole Madjo wrote in a research note Friday. “The downgrade cycle is thus not over in luxury and, as such, we maintain our neutral view on the industry.”
Barclays downgraded LVMH to equal weight from overweight, the same rating it has on Kering, Burberry, Ferragamo and Swatch. The bank has overweight ratings on Hermès and Richemont, which is scheduled to report its annual results on May 16.
It cut LVMH because of:
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The risk of deceleration in the U.S. market, a “main growth driver,” meaning its core fashion and leather goods division could stay in negative territory through 2025.
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Dior is among brands “under pressure” and a recovery “could now take even more time to materialize.” Fendi, Celine, Givenchy and Kenzo are also “seeing negative growth.”
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Given a slowing top line, earnings before interest and taxes margins in fashion and leather goods “may have not reached the bottom” in the second half of 2024.
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Other business divisions exposed to aspirational customers “could face more headwinds,” notably perfumes and cosmetics, and wines and spirits.
Moët Hennessy confirmed its intention “to adjust its organization and gradually return to its 2019 staffing levels, primarily by managing its natural turnover and not filling vacant positions.”
The downsizing was first reported by the Financial Times. It is understood Moët Hennessy’s business, hit by weak demand for cognac in China and the U.S., is now at pre-pandemic levels, when it had 8,200 employees versus the 9,400 employees it had at the end of 2024.
Barclays acknowledged the historic resilience of luxury goods versus other sectors, given its reliance on high-end consumers, but argued that “compared to previous macro slowdowns…all the key markets, including China, are facing some macro pressure, so it is harder to find a region to offset these headwinds.”
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