LVMH shares fell sharply on Wednesday, as fourth-quarter results dashed investors' hopes for a quick recovery in luxury demand, and the market was concerned about slow sales in the critical Chinese market and cautious forecasts from CEO Bernard Arnault, UNN reports with reference to Reuters.
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The group's shares fell by as much as 8.2%, losing 24 billion euros ($28.76 billion) from its market capitalization at one point. By 11:00 GMT (13:00 Kyiv time), the shares were trading down 6.4%.
The world's largest luxury conglomerate, owner of brands from Louis Vuitton to Tiffany and Moet & Chandon champagne, is an indicator for the industry, and the move also dragged down shares of Gucci owner Kering, Moncler and Hermes by 2-5%.
"If a key market leader is a little more cautious for next year, it certainly casts a shadow over the luxury goods segment in general," said Barclays analyst Carole Madjo.
The French group said sales in China - a key market for LVMH and a major growth driver for the broader luxury segment - grew this quarter. But investors expected more after optimistic comments on China from Richemont and Burberry earlier this month.
While LVMH does not provide data on China as a separate market, Asia, excluding Japan, accounted for 26% of its revenues last year. But sales in the region grew by only 1% in the fourth quarter at constant exchange rates.
LVMH's return to growth in the region in the third quarter sparked hopes that the prolonged downturn in luxury goods was coming to an end, leading to a massive rally in luxury stocks in October.
However, Morningstar analyst Elena Sokolova said that the optimism that fueled this growth is now facing a more complex reality.
"Investors are just starting to worry that to maintain the valuations they reached from mid-2025, a recovery is needed. And it doesn't look like that's going to happen anytime soon," she said.
Christopher Rossbach, portfolio manager at J. Stern & Co, which owns LVMH shares, said he considered the share price drop an overreaction.
"We remain confident that LVMH's recovery will continue throughout 2026, supported by creative renewal, new retail initiatives and growing consumer demand, especially from China," he said.
CEO Arnault struck a cautious tone at a press conference after the results were released on Tuesday and said LVMH would continue to limit its spending this year.
"Given the ongoing geopolitical crises, economic uncertainty and the policies of some states, including our own, which are quite anti-business... there are reasons for caution," he said.
Sales in LVMH's key fashion and leather goods division, which generates the bulk of its profits, fell 3% at constant exchange rates in the fourth quarter, a key period for purchases.
Madjo from Barclays said investors had hoped the division would exceed expectations.
UBS estimates that Chinese buyers, including tourists abroad, account for almost a third of sales in LVMH's fashion and leather goods segment.
The company's operating margin for the year decreased to 22% from 23.1% in 2024, driven by a combination of US tariffs, a weak dollar and slowing demand.
CFO Cécile Cabanis said further sales growth would be needed to restore margins.
"We need growth, so we will focus on restoring growth and continue to control our costs," she said at a press conference.
Analysts also noted that a sharp 9% decline in revenue in LVMH's wines and spirits group is a concern, despite the fact that this business accounts for only 6.6% of total revenue.