Lvmh sinks after accounts and drags down luxury, Ferragamo down in Milan

(Il Sole 24 Ore Radiocor) - Lvmh reversed on the Paris Stock Exchange in the aftermath of the release of its 2025 accounts, despite revenues coming in line with expectations and net profit even higher. Analysts, however, pointed the finger at the performance of the Fashion and Apparel division, the group's largest, calling it deluding. They also fear that 2026 will still be a year of uncertainty. So much so, in fact, that the group's top management itself was extremely cautious during the conference call, refraining from giving any indication of the year's performance, either in terms of sales or margins. The performance of Lvmh's shares dragged down the entire luxury sector: in Paris they lost ground Kering and Hermes, while in Milan they were heavyMoncler , Brunello Cucinelli but especially Salvatore Ferragamo , which posted a 2025% revenue trend. Also doing poorly were Swiss Richemont and British Burberry.

Returning to Lvmh, a company considered to be the litmus test of the luxury sector, it closed 2025 with turnover of EUR 80.8 billion, down 5% or 1% organically, operating profit of EUR 17.75 billion (-9%) and net profit attributable to owners of the company of EUR 10.87 billion (-13%). Free cash flow stood at EUR 11.3 billion, up 8%.

The analysts are divided into two groups: those who bet on a recovery in the luxury sector in 2026 and therefore believe that Lvmh is a good investment at these price levels, and those who recommend caution, fearing that the stock is already correctly valued. Especially since not even the number one, Bernard Arnault, in the conference call, gave any indication of 2026, and the financial director, Cecile Cabanis, avoided commenting on margin trends, while confirming that the company will continue to pay attention to cost trends.

Bernstein pointed out that growth in the Fashion and Apparel division "remains negative in the fourth quarter (-3% at constant exchange rates)". The business house nevertheless appreciates the group's work on its flagship brands Louis Vuitton and Dior: 'You could hardly ask for more, in terms of creativity, retail performance, events'. The group, however, had to cope with a global demand for luxury goods that remains weak, especially for so-called aspirational garments. In addition, sales of cognac and spirits were poor, commented the experts, who thus believe that in 2026 'growth potential from cost and capital control will be more limited, as much work has already been done'. In short, only a recovery in demand for high-end goods could again support the group's accounts and consequently the share price. In any case Bernstein thinks positive and maintains that 'Lvmh can be an interesting investment'. Thus it maintains its positive 'Outperform' rating on the shares, with a price target of EUR 700. The experts, however, also put their hands out, pointing out that if the timid recovery in luxury demand detected in the second half of 2025 were a straw fire and if geopolitical tensions were to degenerate into a full-blown crisis - and a stock market correction - the drop in the group's shares could also be substantial. Deutsche Bank also confirmed its 'Buy' recommendation on Lvmh, but cut its target price to EUR 705 from the previous EUR 715.

Barclays on the other hand is more cautious, recommending an 'EqualWeight' with a €580 price target on Lvmh, while commenting that the group's 2025 ebit was better than expected by around 4%. "The group level ebit margin reached 22% and in the core Fashion and Leather Goods division was 35%, compared to the consensus of 34.2%," the British bank's analysts pointed out, however, fearing that "after the earnings releases from Richemont and Burberry which surprised to the upside, particularly with regard to Chinese consumer performance, we believe that Lvmh's results could bring a little more prudence to the sector', especially as fourth quarter revenues for Fashion and Leather Goods fell -3%. Barclays also did not like the weak performance of Spirits and Wines, which they described as disappointing. They also expressed doubts about the performance of Cosmetics and Perfumes, while they appreciated the upturn in Watches and Jewellery (+8% in Q4 organically), showing that hard luxury is doing better than the rest of the industry.