Asia FX cautious amid US govt shutdown; yen tumbles after Takaichi’s LDP win
Goldman Sachs revised its outlook on LVMH (EPA:LVMH) stock, following a disappointing first-quarter update, particularly in the Fashion & Leather Goods (F&LG) division. The luxury goods company reported a 5% decline in the F&LG division, underperforming expectations from JPMorgan and the buyside, which anticipated a smaller decrease of 1% to 3%.
The slowdown marks a return to the low levels seen in the third quarter of 2024 and is mainly due to reduced Chinese spending in Japan, which is now facing difficult comparisons, especially as the second quarter approaches.
LVMH’s sales in Japan had surged by 32% in the first quarter of 2024 and by an even more robust 57% in the second quarter of the same year. The deceleration in the latest quarter is partly attributed to a slight sequential drop in volumes, which were reported as slightly negative. Additionally, the product mix, previously a significant growth driver, is now seen as a minor drag on performance, with management describing it as ’flattish.’
In response to the softer performance, Goldman Sachs has lowered its forecasts for LVMH by 7-8% and reduced the price target from its previous level to €610. The adjustment reflects not only the underwhelming first-quarter results but also anticipates a slower recovery in 2025 and the impact of higher foreign exchange headwinds.
Despite LVMH’s cost-containment efforts, GS anticipates that the sales pressure will likely lead to continued margin contraction throughout 2025, affecting both the F&LG division and the group as a whole. The firm advises caution, suggesting that it is too early to adopt a positive stance on the sector and recommending against buying into the recent pullback.
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