LVMH F&LG returns to modest growth, but J.P. Morgan maintains Neutral

Overview

This report is J.P. Morgan's review of LVMH's H1/Q2 2026 results. Q2 sales were slightly better than expected, with group organic growth of about 3%, and core Fashion & Leather Goods ended seven consecutive quarters of decline and returned to modest positive growth. The report believes the main positives in the results were margin resilience driven by cost control, as well as better-than-expected performance in Watches & Jewellery, Selective Retailing, and Wines & Spirits; however, F&LG growth remains relatively mild, and soft luxury and leather goods categories are still digesting normalization pressures following prior price increases, product elevation, and volume growth.

Core views

J.P. Morgan maintains a Neutral rating on LVMH, believing the stock may find some support after the recent pullback, but does not recommend chasing the rally. The core reasoning is that, on the one hand, brands and businesses such as Dior, Louis Vuitton, Tiffany, Bulgari, and Sephora still demonstrate structural strengths, and F&LG's return to positive growth also eases market concerns; on the other hand, growth in leather goods remains constrained, the strength of the F&LG recovery is insufficient, and earnings forecasts have been raised by only about 1%, so the risk-reward is still not attractive enough to turn more positive in the absence of further favorable earnings revisions.

Analysis framework

The report analyzes H1/Q2 2026 results, divisional sales and margins, brand and regional demand, management guidance, earnings forecast revisions, peer comparisons, and SOTP/DCF valuation. The analysis focuses on whether F&LG has truly returned to attractive growth, category divergence between hard luxury and soft luxury, regional consumption trends, and the impact of cost control and foreign exchange on margins.

Methodology notes

• Valuation methodsSOTP

  sum-of-the-parts valuation

  The target price is based on the SOTP method: Wines & Spirits uses a 2027E EV/EBIT multiple at a 5% premium to the sector average, Louis Vuitton uses a multiple at a 25% premium to peers, Watches & Jewellery is valued at a 10% discount to Richemont, Perfumes & Cosmetics is valued in line with HPC, and the remaining F&LG uses 2027E EV/Sales multiples close to the sector.

• Valuation methodsDCF

  discounted cash flow cross-check

  The SOTP outcome is cross-checked by DCF, with key assumptions including 5% medium-term growth, 3.5% terminal growth, and a 9% WACC.

• industry_analysisPeer read-across

  peer mapping

  The report compares LVMH's performance with European luxury companies such as Richemont, Zegna Group, Swatch, Burberry, Kering, and Hermes to assess divergence in hard luxury, soft luxury, leather goods, and regional consumption trends.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LVMH.PA

  covered_company

  Strengths

  A global luxury leader with strong brands including Louis Vuitton, Dior, Tiffany, Bulgari, and Sephora; cost control drove better-than-expected margins; Watches & Jewellery and Selective Retailing performed strongly.

  Weaknesses

  Core F&LG growth remains mild, and the leather goods category may be facing demand fatigue; demand from Chinese consumers and Middle Eastern clients is weak; P&C is dragged by soft travel retail.

  Comparison

  Compared with companies with greater exposure to hard luxury or high-end ready-to-wear such as Richemont and Zegna Group, LVMH's recovery in soft luxury and leather goods is weaker; on valuation, its 2027E P/E is about 10% below the luxury sector average.

  Risks

  There is downside risk to the rating and target price if Louis Vuitton or the leather goods category slows significantly, the macro environment deteriorates, the euro re-appreciates against the US dollar, renminbi, or yen, or an unfavorable large acquisition occurs.

• Richemont

  peer_read_across

  Strengths

  The report notes Richemont's quarterly sales growth of about +20% ex-FX, reflecting a strong hard luxury trend.

  Weaknesses

  Its business mix differs from LVMH's, so it cannot be used to directly infer all luxury demand.

  Comparison

  LVMH's jewelry trend is directionally consistent with Richemont's, but of smaller magnitude; Watches & Jewellery valuation is set at a 10% discount to Richemont.

  Risks

  If hard luxury demand cools, the sector read-across could weaken.

• Kering

  peer_read_across

  Strengths

  The report expects its jewelry business may benefit from the hard luxury trend.

  Weaknesses

  Leather goods and soft luxury trends remain challenging, and growth depends on execution.

  Comparison

  LVMH's leather goods performance suggests short-term re-acceleration potential may be limited for leather-goods-related companies such as Kering.

  Risks

  Weak soft luxury demand, constrained pricing power, and soft demand from China could weigh on the recovery.

• Hermes

  peer_read_across

  Strengths

  Top-tier brand appeal and high-end client trends remain supportive.

  Weaknesses

  The report believes its base is higher, making further acceleration potentially more difficult.

  Comparison

  LVMH's mild recovery in leather goods implies a cautious read-through for Hermes, especially against a higher comparison base.

  Risks

  If consumer fatigue toward the leather goods category deepens, growth expectations could come under pressure.

Key data

• Q2 group sales growth+3% organic / ex-FXAbove J.P. Morgan's forecast of +2%.
• Q2 F&LG sales growthabout +1% to +2% ex-FXEnded seven consecutive quarters of decline, but growth remained mild despite a low base.
• Watches & Jewellery Q2 growth+11% ex-FXAbove J.P. Morgan's forecast of +8%, with Tiffany and Bulgari both delivering mid-teens growth.
• Selective Retailing Q2 growth+6% organicMainly driven by strong performance from Sephora, partly offset by an approximately 1% deconsolidation impact from DFS Greater China.
• Wines & Spirits Q2 growth+5% ex-FXBetter than J.P. Morgan's -4% forecast, driven by improving Cognac demand in China.
• H1 group EBIT margin22.5%Down 10bps year-on-year, but above J.P. Morgan's forecast of 22.1%.
• H1 F&LG EBIT margin34.1%Down 60bps year-on-year, above J.P. Morgan's forecast of 33.7% and the market's expectation of 33.4%.
• FY26E revenue forecast€81,127mnRaised by 1.0% versus the previous forecast.
• FY27E revenue forecast€85,161mnRaised by 1.7% versus the previous forecast.
• FY26E adjusted EPS€22.52Raised by 1.4% versus the previous forecast.
• FY27E adjusted EPS€26.52Raised by 1.8% versus the previous forecast.
• 2027E P/E17.5x to 17.6xBelow the luxury sector average of about 19.5x, representing an approximately 10% discount.

Impact & implications

The investment implication conveyed by the report is that LVMH's fundamentals are improving at the margin from the trough, but the quality of the recovery is uneven. Hard luxury, jewelry, Sephora, and certain high-end ready-to-wear categories are performing more strongly, while soft luxury and leather goods remain more dependent on volumes and execution, with limited room for further pricing and mix uplift. Margin resilience helps support the stock price, but F&LG growth has not yet proven it can sustainably return to a more attractive level, so J.P. Morgan believes the near-term effect is more likely to be support rather than a re-rating catalyst.

Risks

• A significant slowdown in high-margin Louis Vuitton and the broader leather goods category.
• Deterioration in the macroeconomic environment, especially weakening demand in the United States.
• Renewed appreciation of the euro against the US dollar, renminbi, or yen, creating FX pressure on revenue and margins.
• Negative impact from a large acquisition.
• A slower-than-expected recovery in Chinese consumers, with persistently weak demand for soft luxury and leather goods.
• Underwhelming execution in F&LG creative renewal and supply chain transition.

What to watch

• Whether F&LG can accelerate further from modest positive growth in Q3 and Q4.
• Acceptance of Dior's new products after Jonathan Anderson's creative refresh, supply chain transition, and sales conversion.
• Differences in performance versus the divisional average among brands such as Louis Vuitton, Loro Piana, Rimowa, Celine, and Fendi.
• Regional demand changes among customers in the United States, Japan, South Korea, China, and the Middle East.
• Whether the strong Watches & Jewellery trend can continue, especially the mid-teens growth of Tiffany and Bulgari.
• The balance within Wines & Spirits between improving Cognac demand in China and weakness in the United States.
• The actual impact of FX on sales and margins in H2.
• Whether further positive earnings revisions emerge, which is the key condition for the rating to turn more positive.