LVMH : a buying opportunity despite deteriorating fundamentals

13:30 4 November 2024

LVMH : a buying opportunity despite deteriorating fundamentals

 

Two weeks ago, French luxury companies found themselves in the crosshairs of investors' appetite as the bell announcing the much-anticipated earnings season rang. Leading the way, the market giant LVMH set the tone by weighing down the entire sector, with its stock price plunging to around €588 per share at the open—a drop of about 6% compared to its previous close.

At the same time, Hermès was swept up in the downward trend, falling by 3%, while L’Oréal emerged as the biggest loser, opening the session with an 8% loss. Although some of these declines have since been recouped, thanks in part to Hermès' results, which were more optimistic than those of its peers, there remains significant tension regarding the outlook for CAC 40 leaders amid a global economic slowdown.

Start investing today or test a free demo

Open account Try demo Download mobile app Download mobile app

Lower interest rates, stimulus measures by Chinese authorities, and adjustments in the wine and spirits market—what prospects lie ahead for LVMH as it faces vulnerabilities in a segment of the economy once considered recession-proof?

 

China: A Double-Edged Sword

The strategic decision to expand into the Chinese market, starting with the export of Hennessy cognac in 1859 and followed by the opening of the first Louis Vuitton store in 1982, has arguably been one of LVMH's key growth drivers. The Asia-Pacific region rapidly evolved from a negligible portion of its revenue in the 1990s to nearly 17% by 2004. Twenty years later, this figure has grown to almost 30%.

 

Source : LVMH

 

Yet, what has been one of the company’s best moves is now also its greatest challenge. With quarterly GDP growth below 1% for both the second and third quarters and year-over-year retail sales growth at two to three times below its ten-year average, China is struggling to reignite its post-COVID economy. The People’s Bank of China (PBOC) has decided to intervene, perhaps spurred by concerns over lagging behind monetary easing already undertaken by the U.S. and European counterparts. In late September, it unveiled a series of measures aimed at sparking growth, including reducing commercial banks' reserve requirements and enhancing access to capital.

However, after an initially strong reaction, markets have tempered their expectations, critically assessing the adequacy of these measures. After all, can liquidity keep flowing into an economy with debt levels nearing 84% of its GDP?

 

Source : National Bureau of Statistics of China

 

In the U.S., the concerns are somewhat less pressing, with GDP growth for the second quarter around 3%, above its ten-year average, and investors increasingly confident for a “no landing” scenario—avoiding a recession through timely rate cuts. This is welcomed amid a still-fragile job market, yet rising five-year breakeven inflation rates and bond yields suggest that the Federal Reserve’s maneuvering room may be tighter than anticipated.

On the European side, consumption is decidedly sluggish. Despite wage growth outpacing inflation in the first two quarters of 2024, much of the surplus income seems to have been channeled into savings, reaching a historical rate of around 15.5%. A return to consumer spending may emerge once monetary conditions hit their lowest, although this isn’t expected before at least September 2025.

 

Disappointing Third-Quarter Sales

LVMH’s recently released quarterly results offer only partial insights, as they only include revenue for this period. Nonetheless, the numbers reflect the previously discussed economic trends, revealing that LVMH has borne the brunt of the slowdown. With revenue estimated at €19.08 billion—a 4.44% decrease from the third quarter of 2023—the group is experiencing its first decline in nine-month performance since the COVID crisis in 2020.

 

Source : LVMH

 

The “Fashion & Leather Goods” division is mainly to blame, representing nearly half of the sales, with a 5% drop in revenue. The “Watches & Jewelry” and “Wines & Spirits” segments also underperformed, accounting for 12.8% and 7.5% of the group's sales, respectively. Meanwhile, the “Selective Retailing” and “Perfumes & Cosmetics” sectors performed slightly better, with growth rates of around 2-3%.

 

Assuming sales stabilize in the fourth quarter and the net profit margin for the semester (17.44%) remains steady, LVMH could report earnings of approximately €14.7 billion next year, down from €15.17 billion in 2023.

 

Uneven Economic Impact in the Luxury Sector

Currently, almost all French luxury companies have published their quarterly sales, allowing for a peer comparison based on revenue.

 

Figure

LVMH

Hermès

L’Oréal

Kering

Revenue

60,75 M€

11,21 M€

32,41 M€

12,8 M€

Market share growth

-2,11%

+11,7%

+6,24%

-12,12%

P/S ratio

5,21

19,95

5,91

2,3

Source : XTB Research

 

This comparison highlights disparities among these companies, demonstrating that not all are equally affected by economic fluctuations. LVMH ranks as the third worst performer in terms of market share acquisition, partly due to its high sales volume, which brings it closer to a critical size. Additionally, the brands in its portfolio seem less resilient to the economic slowdown due to a heavier reliance on a client base with moderate incomes.

 

An Appetite for Risk that Led to Consolidation

Since its all-time high of nearly €905 in April 2023, LVMH’s stock has undergone a significant correction, currently hovering around €630. An initial consolidation and encouraging results had prompted a strong rebound, but a renewed decline began in March 2024, just as U.S. indices were booming.

 

Source : XTB Research

 

These trends indicate that LVMH’s downward trajectory unfolded in two phases. The first phase resulted from a growing risk aversion among investors in 2023, peaking in October, when the stock experienced its first consolidation. By March 2024, however, the continued decline was not driven by increased risk aversion or expected volatility, as both variables had stagnated. LVMH’s underperformance relative to the S&P 500 is likely explained by its strong exposure to the Chinese economy.

Interestingly, the risk aversion and volatility curves crossed in August/September, aligning with the current phase of consolidation. This suggests that anticipated market risk is higher, but investors are more willing to embrace it for the potential of higher returns. Options pricing further underscore that LVMH's risk premium is approximately 70% higher than that of the S&P 500.

 

Source : XTB Research

 

With French government bonds yielding 3.017% and a risk aversion coefficient around 18.07%, short-term investors should expect a return of around 9% to invest in LVMH stock, while long-term investors hold a target of 7.7%.

 

Long-Term Growth Fully Priced In

Recent growth forecasts from the IMF provide additional insights into the market’s long-term expectations. These projections have been revised upward for Asia, Europe, and Japan. However, it is essential to adjust this real growth rate by factoring in expected inflation over the next decade and weighting these projections based on LVMH's respective activity exposure in each region.

 

Region

% of revenue

Real GDP growth

Breakeven inflation rate

Nominal GDP growth

Asia

30%

4,5%

1,0%

5,5%

USA

25%

2,1%

2,3%

4,4%

Europe

24%

1,5%

2,0%

3,5%

Japan

9%

0,5%

1,2%

1,7%

Other

12%

3,1%

3,4%

6,5%

Source : IMF

 

Thus, LVMH’s anticipated long-term earnings growth is estimated at 4.523%. Incorporating the short-term risk premium into the Gordon growth model (which assumes the growth rate is the difference between the risk premium and the return rate), and with a trailing twelve-month net yield of approximately 4.48%, the market seems to have fully integrated this rate into the current stock price, and is now looking to price shorter-term results as new data becomes available.

 

Potential Entry Signals for LVMH Stock

LVMH’s current price is influenced by the prevailing level of expected market volatility and rising bond yields, driven by concerns over a potential return of inflation. However, with falling interest rates and increased coverage by fund managers in the thick of earnings season, operators may soon revert to more flexible valuation assumptions, incorporating a longer-term expected volatility of 26%. In such a scenario, and assuming steady bond yields (around 3%), risk aversion (18.07%), and growth expectations (4.523%), the stock could reach its historical highs above €900.

On a technical note, the price is currently below the fifty-two-week moving average adjusted by one standard deviation, a level generally favored by operators as a statistical undervaluation and entry signal in the long-term trend. The RSI has found support around 30% and showed an upward impulse, while the stock price continued to depreciate simultaneously. This suggests that the current price might represent a potential entry opportunity before a gradual revaluation of the stock’s associated volatility.

 

Source : xStation5


Maxime Raturat, XTB Research France

This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

Back

Join over 1 Million investors from around the world

We use cookies

By clicking “Accept All”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

This group contains cookies that are necessary for our websites to work. They take part in functionalities like language preferences, traffic distribution or keeping user session. They cannot be disabled.

Cookie name
Description
SERVERID
userBranchSymbol cc 17 October 2024
adobe_unique_id cc 16 October 2025
test_cookie cc 1 March 2024
SESSID cc 9 September 2022
__hssc cc 16 October 2024
__cf_bm cc 16 October 2024
intercom-id-iojaybix cc 13 July 2025
intercom-session-iojaybix cc 23 October 2024
xtbCookiesSettings cc 16 October 2025
xtbLanguageSettings cc 16 October 2025
TS5b68a4e1027
countryIsoCode
userPreviousBranchSymbol cc 16 October 2025
TS5b68a4e1027
_cfuvid
intercom-device-id-iojaybix cc 13 July 2025
__cfruid
__cf_bm cc 16 October 2024
__cf_bm cc 16 October 2024
_cfuvid
adobe_unique_id cc 16 October 2025
TS5b68a4e1027
_cfuvid
xtbCookiesSettings cc 16 October 2025
SERVERID
TS5b68a4e1027
__hssc cc 16 October 2024
test_cookie cc 1 March 2024
intercom-id-iojaybix cc 13 July 2025
intercom-session-iojaybix cc 23 October 2024
intercom-device-id-iojaybix cc 13 July 2025
UserMatchHistory cc 31 March 2024
__cf_bm cc 16 October 2024
__cf_bm cc 16 October 2024
__cf_bm cc 16 October 2024

We use tools that let us analyze the usage of our page. Such data lets us improve the user experience of our web service.

Cookie name
Description
_gid cc 9 September 2022
_gat_UA-22576382-1 cc 8 September 2022
_gat_UA-121192761-1 cc 8 September 2022
_ga_CBPL72L2EC cc 16 October 2026
_ga cc 16 October 2026
AnalyticsSyncHistory cc 8 October 2022
af_id cc 31 March 2025
afUserId cc 1 March 2026
af_id cc 1 March 2026
AF_SYNC cc 8 March 2024
__hstc cc 14 April 2025
__hssrc
_vwo_uuid_v2 cc 17 October 2025
_ga_TC79BEJ20L cc 16 October 2026
_vwo_uuid cc 16 October 2025
_vwo_ds cc 15 November 2024
_vwo_sn cc 16 October 2024
_vis_opt_s cc 24 January 2025
_vis_opt_test_cookie
_ga cc 16 October 2026
_ga_CBPL72L2EC cc 16 October 2026
__hstc cc 14 April 2025
__hssrc
_ga_TC79BEJ20L cc 16 October 2026
af_id cc 31 March 2025
afUserId cc 1 March 2026
af_id cc 1 March 2026
AF_SYNC cc 8 March 2024
_gcl_au cc 14 January 2025
AnalyticsSyncHistory cc 31 March 2024
_gcl_au cc 14 January 2025

This group of cookies is used to show you ads of topics that you are interested in. It also lets us monitor our marketing activities, it helps to measure the performance of our ads.

Cookie name
Description
MUID cc 10 November 2025
_omappvp cc 28 September 2035
_omappvs cc 16 October 2024
_uetsid cc 17 October 2024
_uetvid cc 10 November 2025
_fbp cc 14 January 2025
fr cc 7 December 2022
muc_ads cc 16 October 2026
lang
_ttp cc 10 November 2025
_tt_enable_cookie cc 10 November 2025
_ttp cc 10 November 2025
hubspotutk cc 14 April 2025
YSC
VISITOR_INFO1_LIVE cc 14 April 2025
hubspotutk cc 14 April 2025
_uetsid cc 17 October 2024
_uetvid cc 10 November 2025
_ttp cc 10 November 2025
MUID cc 10 November 2025
_fbp cc 14 January 2025
_tt_enable_cookie cc 10 November 2025
_ttp cc 10 November 2025
li_sugr cc 30 May 2024
guest_id_marketing cc 16 October 2026
guest_id_ads cc 16 October 2026
guest_id cc 16 October 2026
MSPTC cc 10 November 2025
IDE cc 10 November 2025
VISITOR_PRIVACY_METADATA cc 14 April 2025
guest_id_marketing cc 16 October 2026
guest_id_ads cc 16 October 2026
guest_id cc 16 October 2026
muc_ads cc 16 October 2026
MSPTC cc 10 November 2025
IDE cc 10 November 2025

Cookies from this group store your preferences you gave while using the site, so that they will already be here when you visit the page after some time.

Cookie name
Description
personalization_id cc 16 October 2026
UserMatchHistory cc 8 October 2022
bcookie cc 16 October 2025
lidc cc 17 October 2024
lang
bscookie cc 8 September 2023
li_gc cc 14 April 2025
bcookie cc 16 October 2025
lidc cc 17 October 2024
bscookie cc 1 March 2025
li_gc cc 14 April 2025
personalization_id cc 16 October 2026

This page uses cookies. Cookies are files stored in your browser and are used by most websites to help personalise your web experience. For more information see our Privacy Policy You can manage cookies by clicking "Settings". If you agree to our use of cookies, click "Accept all".

Change region and language
Country of residence
Language