European luxury stocks broadly advanced on Tuesday following LVMH’s release of second-quarter results that showed revenue growth picking up and the group’s flagship fashion and leather goods business returning to positive territory. The results provided a tentative sign of stabilization for a sector that has faced an extended softness in demand.
By 08:11 GMT, Kering’s shares had gained about 2%, while Hermès and L’Oréal each inched higher by less than 1%.
LVMH itself initially rose marginally in early trading after the results were published, but the stock later reversed course and traded about 1.5% lower as some investors remained unconvinced that the company’s most profitable division is on a firm trajectory of recovery.
The owner of Louis Vuitton and Dior, a company often treated as a bellwether for the luxury industry, reported quarterly revenue of €19.52 billion, a 3% increase on an organic basis from the same period a year earlier. That marked an improvement from the 1% organic growth reported in the first quarter and slightly exceeded consensus expectations, with analysts polled by Visible Alpha forecasting €19.45 billion.
Within the group, the fashion and leather goods division - LVMH’s largest - posted quarterly sales of €8.9 billion, up 1% year-on-year. This represented a swing from the 2% decline recorded in the prior quarter and signaled a return to growth after several consecutive quarters of contraction. However, the 1% gain fell short of analysts’ expectations for a 1.7% rise, with the company noting softer consumer spending in Europe, where tourism has been hit by the Iran war.
Analysts at RBC Capital Markets highlighted the uncertainty that remains. In a note, they said the central question is whether the fashion and leather goods division can meet full-year expectations in the face of a tougher year-on-year comparison in the third quarter, and added that achieving those expectations is necessary "for the stock to start working."
LVMH, led by French billionaire Bernard Arnault, said existing geopolitical and economic disruption has been amplified by the war in the Middle East. When excluding the direct impact of that conflict, the company reported a 4% rise in revenue for the second quarter.
Despite the mixed reaction in equity trading, the results show a marginal improvement in underlying sales trends at the group level and within its most important business unit. Market participants will likely focus on upcoming quarterly comparisons and regional spending patterns, particularly in Europe, to judge whether recent progress can be sustained.