LVMH Moët Hennessy Louis Vuitton, the world's largest luxury conglomerate, has seen its share price collapse to levels not witnessed since December 2020. The stock has tumbled more than 54% from its May 2023 peak, erasing hundreds of billions in market value. The company's market capitalization has shrunk from approximately €439 billion to around €189 billion, reflecting a dramatic reversal in investor sentiment.
The sell-off has also taken a toll on the fortune of Bernard Arnault, LVMH's chairman and CEO. Over the past year, his net worth has declined by over $45 billion, settling at $132 billion, according to Bloomberg Billionaires Index.
Luxury sector under pressure
LVMH's decline is part of a broader downturn affecting the luxury goods industry. Rival Hermès has dropped 54% from its record high, while Kering's stock has fallen to €213, more than 70% below its all-time peak. In the UK, Burberry shares have slid to 1,025p, significantly lower than their previous high of 2,452p. Collectively, these declines have wiped out billions in shareholder value across the sector.
Weak financial results and China slowdown
LVMH's recent financial report highlighted the challenges. Organic revenue grew only 2% in the first nine months of the year, with the crucial fashion & leather goods division reporting a 4% decline to €26.39 billion. Perfumes and cosmetics revenue fell 2% to €5.9 billion, while selective retailing slipped about 1%. Growth in wines and spirits and watches and jewellery partially offset these declines.
The primary drag is the Chinese market, where luxury demand has weakened considerably. Consumers are prioritizing debt repayment following the real estate sector's collapse, and competition from local brands like Chow Tai Fook, Laopu Gold, Shang Xia, and Bosideng is intensifying. This trend is expected to persist in the near term.
On a brighter note, demand from the United States and Japan has remained resilient. US sales rose 4% in the first nine months, while Japan and Asia saw increases of 5% and 3%, respectively.
Valuation concerns
Despite the sharp decline, some analysts argue LVMH is still not cheap. Its trailing price-to-earnings ratio stands at 18, slightly above the DAX Index's average of 17. This has fueled concerns that the stock may have further to fall.
Technical analysis: more downside likely
The weekly chart reveals a persistent downtrend, with the stock forming a series of lower lows and lower highs. It has broken below the key support level of €428, invalidating a potential double-bottom pattern. The Average Directional Index (ADX) at 24 indicates strengthening trend momentum, while the price remains below all major moving averages and the Supertrend indicator, signaling bearish control.
Given these technical signals, the path of least resistance appears to be downward. The next significant support level is at €350. Should the stock rebound, the first resistance to watch is €428, but a break-and-retest pattern suggests that level could act as a ceiling.
Investors are now weighing whether the current valuation presents a buying opportunity or if the ongoing headwinds in China and the broader luxury market will drive the stock even lower.
This article is for informational purposes only and does not constitute financial advice.
