LVMH: A Rally Built on Low Expectations

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Right. So, LVMH – you know, the people who basically are luxury – saw their stock jump a frankly startling 5.3% on Friday. 5.3%. It’s…a number. And frankly, I’m a little concerned we’re celebrating fractional gains as if they’re a breakthrough. But then again, context, darling, context.

They published their first-half earnings, and the news wasn’t exactly champagne wishes and caviar dreams. Revenue and profits? Down. Consistently. Predictably, almost. But here’s the thing – the drop wasn’t quite as catastrophic as everyone in the industry was bracing for. Apparently, avoiding a complete financial meltdown is now considered a win. Sets a charmingly low bar, doesn’t it?

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The Art of Managing Disappointment

Look, let’s be real. The stock had already taken a hammering before these results even dropped – down 14.6% year-to-date, and more than 45% off its peak. It was practically begging for a bounce. And the timing? Oh, the timing. Just when the delightful tension between the US and China decided to crank itself up to eleven. Because, naturally, those two are LVMH’s biggest playground. Honestly, the global economy feels like a particularly messy blind date at the moment.

First half revenue slipped 3% organically, operating profits were down 15%. They tried to spin it as improvements in some categories offsetting…well, not improvements in others. But the Fashion & Leather Goods division – the engine room, accounting for nearly half their revenue and a ridiculous 80% of profits – actually worsened. A little detail they conveniently glossed over, I suspect. One wonders if they just hoped no one would notice.

LVMH (LVMUY)Revenue growth Wines & Spirits Fashion & Leather Goods Perfumes & Cosmetics Watches & Jewelry Selective Retailing Total
First- quarter revenue (9%) (5%) (1%) 0% (1%) (3%)
Second quarter (4%) (9%) 1% 0% 4% (4%)
First half (7%) (7%) 0% 0% 2% (3%)

Seriously, a worsening engine room? That’s not usually a recipe for a rally. But fear – the very real fear of even worse tariffs – clearly acted as a sort of perverse safety net. It’s the market equivalent of “well, it could have been much, much worse”.

Brands and Margins: The Illusion of Control

Despite everything, LVMH still clings to a respectable 22.6% operating margin. It’s that brand power, I suppose. And diversification. They sell…everything. It’s a beautifully constructed empire built on the desire for things people don’t need. Still, 20 times this year’s earnings estimates? That’s a high multiple, even for luxury. People are willing to pay a premium for the *idea* of resilience, the belief that the wealthy will keep spending regardless of what happens to the rest of us. Which, let’s be honest, is probably true. It just feels…wrong, somehow.

China, of course, remains the elephant in the room. Three years of near-recessionary conditions is hardly conducive to impulse purchases of ridiculously expensive handbags. But investors seem to be betting that things can’t get much worse. A bold strategy. Perhaps even…optimistic. I’m not sure I share their confidence. Frankly, I’m always bracing for the other shoe to drop.

LVMH’s potential hinges on a U.S. and Chinese economic recovery. It’s a turnaround story, potentially. But it requires a level of global stability that, frankly, feels increasingly fictional. We’ll see. We always do. 🙄

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2025-07-26 00:06