The world's leading luxury goods group, kicking off the sector's reporting season, announced yesterday after the Paris market close organic sales growth of 1% for the first three months of the year, a performance perfectly in line with market expectations.

However, reported revenue fell by 6% to 19.1 billion euros, missing the analyst consensus of 19.5 billion euros.

Fashion and Leather Goods under pressure

Closely scrutinized by the market, sales for the Fashion & Leather Goods division - home to Louis Vuitton, the group's primary profit engine - declined by 2% on a comparable basis over the quarter, a sharper contraction than the 1% drop forecast by the consensus.

While investors expected the conflict involving Iran to impact business, the scale of the fallout surprised analysts.

In its press release, LVMH noted that the Middle East conflict weighed on organic growth by approximately 1% during the quarter.

Mixed performance across divisions

Other divisions reported highly disparate performances to varying degrees.

The sole positive surprise came from the Wines & Spirits branch, which grew by 5% on a comparable basis, whereas the market had anticipated a decline of around 1%.

In Watches & Jewelry (Tiffany, Tag Heuer, Bulgari), organic contraction reached 2%, a more pronounced retreat than the 1% expected.

Sales in Perfumes & Cosmetics (Dior, Guerlain, Givenchy) also fell short of expectations, posting a 6% organic decline compared to the 4% drop anticipated.

Selective Retailing - which includes the Sephora beauty chain - also disappointed, despite being one of the rare sources of organic growth for the quarter (+4%).

This weak momentum over the first three months of the year weighed on the group's earnings outlook, leading to downward revisions from analysts.

Faced with a geopolitical and economic environment significantly disrupted by the Middle East conflict, LVMH acknowledged yesterday evening that it remains "vigilant but nonetheless confident" at the start of the year.

Price targets revised downward

Analysts at Oddo BHF, who maintain an "Outperform" rating on the stock with a price target of 583 euros, indicated they have slightly lowered (-1%) their annual operating profit (EBIT) forecasts.

Bernstein remains "Outperform" but reduced its price target from 685 to 600 euros, judging that more will be needed to convince investors to abandon their cautious stance.

Deutsche Bank maintains its "Buy" recommendation with a target lowered from 620 to 600 euros, citing a "disappointing Q1, even accounting for the Middle East."

Jefferies, which maintains a "Hold" rating, cut its target from 610 to 510 euros, stating it foresees only a "gradual" improvement in activity.

"It is still too early to turn positive again," concluded analysts at AlphaValue.

Luxury holds its ground despite headwinds

The stock, which had already significantly underperformed its peers since the start of the year, is now down more than 26% in 2024. With a valuation of 278 billion euros, the group remains the second-largest market capitalization in the eurozone, though it trails far behind ASML (589 billion euros).

Conversely, the stock did not drag Kering (+2.2%) down with it; the Gucci owner is set to publish its Q1 revenue this evening ahead of a highly anticipated investor meeting scheduled for Thursday. Richemont advanced by 2.2% and Hermes by 0.6%.