Shares of iconic brand house LVMH Moët Hennessy (LVMUY 5.39%) rallied 5.3% on Friday, as of 3:28 p.m. ET.
The luxury goods giant reported earnings last night for the first half of 2025, which showed continued year-over-year declines in revenue and profits. And yet, LVMH's stock rose, as results were apparently better than feared, and investors may believe the stock has already bottomed after being cut in half from its highs.
Revenue and profits down but so was the stock
Coming into the day, LVMH's stock had fallen 14.6% year to date and was over 45% below its all-time high. So, there was already a lot of pessimism around the stock, especially as the U.S.-China trade tensions had ratcheted up in the second quarter. Those are, essentially, LVMH's two most important markets.
In the first half, LVMH's revenue declined 3% year over year on an organic basis, and operating profits fell 15%. While there were improvements in most of LVMH's product categories from Q1 to Q2, the company's core Fashion & Leather Goods segment got worse.
|
LVMH (LVMUY 5.39%)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%) |
Data source: LVMH 1H earnings release.
The Fashion & Leather Goods segment accounts for nearly half of revenue and nearly 80% of operating profits. So the fact that that segment saw an accelerating decline wasn't good.
That being said, LVMH stock rallied anyway, perhaps due to fears the recent tariffs would have led to an even greater downturn across the business.
Image source: Getty Images.
LVMH's brand-focused margins spur optimism
Despite the revenue and margin decline, LVMH still made a healthy 22.6% operating margin, owing to its famous brands and diversification. And while the stock may not look "cheap" on an absolute basis of 20 times this year's earnings estimates, luxury goods tend to garner higher multiples in the market due to the perception of resilient demand among well-off customers.
Of course, these companies aren't immune from the economic cycle, especially in China, which has been in recessionary conditions for three years now. So despite lukewarm, not-so-great results, it appears investors believe the recent decline has provided a solid bottom for the stock.
LVMH remains an interesting turnaround story, as long as the economic climate in the U.S. and China improves.
