LVMH lost its position as Europe’s largest luxury goods company by market value on Tuesday to rival Hermès as the industry leader’s first-quarter revenue disappointment soured investor sentiment.
LVMH’s high-end brands include Louis Vuitton and Dior, jewelry brand Tiffany & Co. and beauty chain Sephora. LVMH’s first-quarter sales missed expectations as U.S. shoppers cut back on beauty products and cognac and sales in China remained weak.
LVMH shares fell 7%, reducing its market value to 246 billion euros, while Hermès’s market value is 247 billion euros.
While market valuations tend to fluctuate, Tuesday’s trading “does reflect the different performance and investor sentiment between the two companies,” said Jelena Sokolova, senior equity analyst at Morningstar.
Sokolova noted that LVMH is more active in the lower-end luxury segment, while Hermès has a more affluent clientele, making it better able to withstand an industry downturn.
Hermès, whose Birkin and Kelly bags cost up to $10,000, is known for tightly controlling production, with annual production increases of 6-7%.
Flavio Cereda, head of luxury brand investment strategy at GAM, noted that the market value overtake is “quite telling of the post-pandemic world,” with LVMH fashion brands having far more market share than in the past, having outperformed rivals in the post-pandemic boom.
Cereda said there will “certainly be pain in the short term,” noting that Louis Vuitton’s greater focus on mid-range luxury is an “area of concern.”
LVMH shares fell 7.2%, leading the luxury sector’s losses, with Gucci-parent Kering and Hermès falling 2% and 0.3%, respectively. Shares of Switzerland’s Richemont, which owns Cartier, fell 0.7%, while Italy’s Prada Group slid 4.2%.
LVMH’s first-quarter sales fell 3%, well below analysts’ expectations for a 2% increase, suggesting another tough year for luxury goods companies after U.S. President Donald Trump recently announced tariffs and raised recession fears.
Piral Dadhania, an analyst at Royal Bank of Canada, said the results pointed to “a tougher trading environment across the luxury goods industry.” He cut his organic sales forecast for LVMH this year to flat from a previous forecast of 3% growth, citing the first-quarter sales miss.
Investors had hoped the luxury sector would be able to pull out of the downturn this year, but trade tensions have raised concerns about a global recession.
Deutsche Bank noted that the improvement seen in late 2024 now looks like an anomaly, as sales at LVMH’s main fashion and leather goods business, home to the Louis Vuitton and Dior brands, have returned to a 5% decline.
Shares of luxury goods companies have been falling since the end of March, with LVMH, Kering and Burberry all down 14%, Richemont down 13% and Hermès down 5%.
Bernstein analysts recently cut their sales forecast for the industry this year to a 2% decline from a previous forecast of 5% growth, which would be the industry’s longest downturn in more than two decades.