MC

The luxury industry faces something similar to 2020 when there was a high demand due to COVID-related passion to wealth accumulation. In the pandemic time, the money printing press was leading to devaluation of both the Dollar and the Euro. Now, the ongoing cycle of interest rate cuts on both sides of the pond is fulfilling this job pretty well. When looking at the madly climbing Gold prices, now above $4,000 per troy ounce, rich families think that branded items from Louis Vuitton bags to Moet champagne will soon become even more expensive. They no longer put off expensive purchases for later, but spend money to save even more later. As a result, shares of LVMH (Louis Vuitton Moet Hennessy) controlled by French billionaire Bernard Arnault have made their best performance in over two decades this week.

The stock added more than 10% to its market value to reach €300 billion euros, which also brought almost $70 billion per day to consolidated market caps of the whole European luxury industry reflected by the STOXX Europe Luxury 10 index, Reuters calculated. This outpaced the last big buying spree for the segment, which happened in early 2024. The jump from under €540 at closing price of October 14 to the new highs of around €610 the next day has been prompted by LVMH quarterly results, which demonstrated huge luxury demand in China. The world’s top group in the industry soared as much as 13%, substantially exceeding consensus estimates as it hit over €40 billion in three-month sales for the first time ever. By the way, all major LVMH rivals like Hermes, Kering, Richemont or Burberry, immediately gained between 5% and 9% on hopes that China's demand show will go on.

Sales in mainland China turned most positive, as shoppers were responding to new store experiences, such as Louis Vuitton’s cruise ship boutique in Shanghai. This happened despite the recent property crisis and some trade war effects. Chinese nationals reportedly account for a third of all global luxury sales in the segment. Sales were above expectations across all LVMH divisions like span beauty and jewellery, fashion and spirits, and hotels as well. The only thing is that its fashion and leather goods division, which was considered as the group's profit driver, improved from the previous quarter, but still declined 2% YoY. Again, some experts are feeling that the next potential speedy acceleration will come only in the second half of the next year, as more collections from new and popular designers will enter stores in the second quarter of 2026.

Anyway, rising momentum hints that a recovery to at least €750, where LVMH stock has been already at the beginning of 2025, then followed by moderate stagnation in sales, is inevitable in nearest months while higher targets could be postponed and achieved in 2026, indeed. Nevertheless, UBS upgraded LVMH to Buy, lifting its target price to €680 from former €513, as "actions taken by the company to improve performance in its crucial Fashion & Leather Goods division are proving effective". This implied as much as 33% upside from LVMH’s current market price of just around €600. It's worth recalling the €886.15 peak price for LVMH in March 2024. Since then, the global inflation pressure has been eating away at consumer demand, but now cheaper money combined with more and more expensive precious metals are starting to help luxurious shining.