MC: Future Performance Will Depend On Recovery In Global Luxury Demand

Key Takeaways

• Expansion in Asia-Pacific and digital retail, alongside operational efficiencies, positions LVMH for revenue growth and improved margins as economic conditions recover.
  
• Investments in innovation, sustainability, and brand diversification strengthen long-term resilience, meeting evolving luxury consumer preferences and reinforcing brand loyalty.
  
• Economic softness in Asia, profit margin pressure, currency volatility, costly operational initiatives, and rising regulatory scrutiny all threaten sustained growth and premium positioning.

Catalysts

Operates as a luxury goods company worldwide.

• Improvement in local demand in China and the broader Asia-Pacific region, driven by innovative experiential retail (e.g., unique Louis Vuitton installations in Shanghai) and the ramp-up of high-profile local initiatives across brands, positions LVMH to capture the expanding affluent consumer base-likely contributing to future top-line (revenue) growth as macro headwinds subside.
  
• Strengthening operational efficiencies and cost containment, with targeted structural initiatives to optimize store networks and supply chains (including ongoing Moët Hennessy transformation and increased automation/vertical integration), should translate into higher operating leverage and improved net margins once revenues stabilize or return to growth.
  
• Continued investment in product innovation and portfolio diversification-including launches like Louis Vuitton beauty, new creative leadership at major brands, and luxury hospitality expansions-supports long-term growth and margin resilience by reinforcing brand desirability and tapping into the rising demand for luxury as a lifestyle among younger, affluent consumers.
  
• Sustained momentum at Sephora and restructuring progress at DFS demonstrate LVMH's ability to capture share in high-growth, digitally enabled luxury retail, aligning with the ongoing global shift to e-commerce and omnichannel, which can drive both revenue growth and margin expansion over time.
  
• Ongoing investments in sustainability, supply chain transparency, and ESG leadership reinforce brand loyalty and pricing power in a market where affluent consumers are increasingly prioritizing ethical and responsible brands-supporting long-term resiliency of revenues and protecting gross/net margins.

LVMH Moët Hennessy - Louis Vuitton Société Européenne Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming LVMH Moët Hennessy - Louis Vuitton Société Européenne's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.3% today to 17.8% in 3 years time.
• Analysts expect earnings to reach €16.4 billion (and earnings per share of €30.93) by about September 2028, up from €11.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €11.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, down from 23.6x today. This future PE is lower than the current PE for the GB Luxury industry at 23.6x.
• Analysts expect the number of shares outstanding to decline by 0.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.14%, as per the Simply Wall St company report.

LVMH Moët Hennessy - Louis Vuitton Société Européenne Future Earnings Per Share Growth

Risks

• Prolonged weakness in key Asian markets, especially China and Japan, weighed heavily on Fashion & Leather Goods, with high-single-digit to double-digit sales declines. Given LVMH's dependence on Asian consumers, further economic slowdown or consumer retrenchment in the region-or ongoing tourism disruption-risks structurally softer top-line growth and group revenues.
  
• Brand and division profitability is under pressure from declining volumes, gross margin deleverage, and inflation in cost of goods sold (notably in Wine & Spirits and Fashion & Leather), with recurring operating profit for the group down 15% and some divisions down as much as 33%. Sustained cost inflation and weak operating leverage could compress net margins and reduce earnings.
  
• Material currency fluctuations and adverse FX impacts negatively affected both reported revenues and margins, with the company warning of higher transactional and translation impacts in the second half. Continued currency volatility could further erode international revenues and profitability, especially given the global footprint.
  
• Increasing operational complexity and investment requirements-such as ongoing store renovations (e.g., Tiffany at only 30% complete), selective retail closures, and persistent restructuring at Moët Hennessy-present execution risks, higher fixed costs, and could weigh on earnings growth or tie up capital if not flawlessly delivered.
  
• Heightened scrutiny of supply chain ethics, as highlighted by supply chain issues at Loro Piana, and rising regulatory/compliance requirements on sustainability across the luxury industry threaten to increase costs and brand risk, potentially pressuring profit margins and complicating LVMH's premium brand positioning over the long term.

Valuation

• The analysts have a consensus price target of €552.904 for LVMH Moët Hennessy - Louis Vuitton Société Européenne based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €720.0, and the most bearish reporting a price target of just €434.6.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €92.2 billion, earnings will come to €16.4 billion, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 8.1%.
• Given the current share price of €520.8, the analyst price target of €552.9 is 5.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.