LVMH 1Q26 conference call: core brands and demand in China and the US are improving, but short-term headwinds still weigh on expectations

Overview

This report is Bernstein's summary of the key takeaways from LVMH's 1Q26 investor conference call. The central view is that although 1Q26 growth came in below expectations and led to forecast cuts, LVMH's core fundamentals are improving, including Louis Vuitton's resilience, Dior's creative recovery, the rebound in domestic China consumption, improving momentum among US consumers, and operational improvement across several core divisions. Short-term uncertainty is mainly driven by the Middle East conflict, macro and inflation pressure, FX headwinds, and weaker revenue growth.

Core views

Bernstein believes LVMH's improvement is happening in the most important places. Dior's new creative direction is lifting brand performance above the Fashion & Leather Goods average; Louis Vuitton is maintaining resilience through new products and a distinctive retail experience, with management expecting momentum to continue into 2Q26; Chinese domestic consumer spending is growing, overseas spending has improved significantly; and US consumer momentum has improved, while comparison bases will become more favorable. At the same time, the Middle East conflict dragged on 1Q26 growth and could continue to affect 2Q26. Combined with macro uncertainty and pressure on middle-income consumers, the short-term recovery path remains uneven.

Analysis framework

The report is based on 1Q26 reported results and management comments from the conference call, breaking down growth drivers by region, nationality, and business division, and incorporating the latest operating data into Bernstein's FY26 revenue, margin, and EPS forecasts. Valuation uses a target P/E multiple relative to MSCI Europe and compares it with LVMH's historical valuation range.

Methodology notes

• Valuation methodsRelative P/E multiple valuation

  Value MSCI Europe using a target 1.8x relative P/E multiple and apply it to blended forward EPS on an NTM+1 basis.

  This method anchors LVMH's valuation to a relative multiple versus the European market index, which currently implies about 22x NTM+1 P/E, near the midpoint of LVMH's historical trading range.

• Performance decompositionOrganic sales growth and regional/segment split

  Use OSG, region, nationality, and business segment performance to assess growth quality.

  The report focuses on the performance of Fashion & Leather Goods, Wines & Spirits, Watches & Jewelry, and Selective Distribution, as well as demand shifts in the US, China, Japan, Europe, and the Middle East.

Asset mapping & comparison

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

• LVMH Moet Hennessy Louis Vuitton SE (MC.FP)

  Core coverage name

  Strengths

  Louis Vuitton is highly resilient; Dior is recovering creatively; Chinese and US consumers are improving; Sephora continues to gain share; Tiffany and Bvlgari support Watches & Jewelry.

  Weaknesses

  Fashion & Leather Goods growth is below expectations; tourist spending is weak; DFS is dragging on Selective Distribution; FX and slower revenue growth are pressuring margins.

  Comparison

  Dior is now performing above the Fashion & Leather Goods average and close to Louis Vuitton; Louis Vuitton remains more resilient than competitors.

  Risks

  Continuation of the Middle East conflict, macro uncertainty, inflation pressure, pressure on middle-income consumers, FX headwinds, and normalization of luxury demand.

• Louis Vuitton

  Core brand driver

  Strengths

  Demand is resilient, it can attract customers through new products and a distinctive retail experience, and the new Seoul flagship helps reconnect with Korean customers.

  Weaknesses

  It is still operating against a backdrop of slowing overall luxury demand and depends on conversion among high-end customers and returning travelers.

  Comparison

  It is outperforming the Fashion & Leather Goods average and remains more resilient than competitors.

  Risks

  If macro pressure broadens or tourist spending remains weak, the pace of recovery could be limited.

• Dior

  Source of recovery and brand momentum

  Strengths

  The creative leadership change has been well received, with clear improvement in China and the US; new launches are mainly being driven by ready-to-wear, and there will still be more leather goods and accessories launches in 2Q26.

  Weaknesses

  Performance in Japan and Europe is slightly weaker.

  Comparison

  It is performing above the Fashion & Leather Goods average and close to Louis Vuitton.

  Risks

  Whether the creative recovery can continue to translate into leather goods and accessories sales remains to be seen.

• Sephora

  Growth support for Selective Distribution

  Strengths

  It is growing across regions and gaining share, UK expansion has been successful, and the Middle East has been relatively resilient thanks to higher Saudi exposure.

  Weaknesses

  The DFS disposal and weak travel retail are weighing on the segment's overall performance.

  Comparison

  It continues to outperform in beauty retail, but competition in US beauty retail is intensifying.

  Risks

  Intensifying competition in US beauty retail and continued pressure in color cosmetics could weigh on performance.

Key data

• RatingOutperformBernstein maintains its Outperform rating.
• Target price€600.00Previous target price was €685.00.
• FY26 Fashion & Leather Goods OSG forecast+2.4%Cut by -240bps, 32bps below consensus.
• FY26 group OSG forecast+3.1%Cut by -78bps, 11bps above consensus.
• FY26 EBIT margin forecast21.7%Down from 22% in FY25; forecast cut by -57bps.
• FY26 EPS forecast change-3.3%About 2% below consensus after the cut.
• Middle East conflict impactGroup OSG -100bps; Fashion & Leather Goods -200bpsMarch group impact was about -300bps; the Middle East represents about 6% of group exposure.
• US 1Q26 organic growth+3%US consumers improved from slightly negative growth in 4Q25 to low- to mid-single-digit positive growth.
• APAC ex. Japan 1Q26 organic growth+7%Driven by China and North Asia, especially Korea.
• Japan 1Q26 organic growth-3%Mainly affected by lower tourist spending.
• Europe 1Q26 organic growth-3%Affected by lower tourist spending, FX, and Middle East conflict disruption.
• Wines & Spirits 1Q26 organic growth+5%Champagne had a good start in Europe; cognac was supported by the Lunar New Year calendar effect, but US cognac demand remains weak.
• Watches & Jewelry 1Q26 organic growth+7%Tiffany's transformation is progressing, with strong HardWear growth; Bvlgari performed well.
• Selective Distribution 1Q26 organic growth+4%DFS weighed on growth by about 2 percentage points; Sephora grew across regions and continued to gain share.

Impact & implications

The investment implication is positive but more selective. Improvements in LVMH's core brands and key consumer groups should support a medium-term recovery, but FY26 forecasts have already been cut, and the share price may continue to be influenced by the Middle East conflict, macro consumer pressure, FX headwinds, and margin pressure in the near term. Bernstein still rates the stock Outperform, indicating that it believes these short-term headwinds may be obscuring more important fundamental improvement.

Risks

• If the Middle East conflict continues into 2Q26, it could create a similar or slightly greater drag on group and Fashion & Leather Goods growth.
• Macro uncertainty and inflation pressure may weigh on discretionary spending by middle-income consumers, a segment to which LVMH has significant exposure.
• FX is expected to create about a -80bps margin headwind in 1H26.
• Tourist spending remains weak, weighing on Japan, Europe, and overall Fashion & Leather Goods performance.
• The post-pandemic shift in spending from goods back to experiences may continue to pressure luxury growth.
• Geopolitical escalation could weaken consumer confidence and hurt luxury demand.
• Intensifying competition in US beauty retail and pressure in cosmetics could weigh on Sephora.

What to watch

• Whether the Middle East conflict continues into 2Q26 and whether demand from the Middle East flows back to Europe and other regions.
• Whether new product launches, conversion, and brand momentum at Louis Vuitton and Dior continue to improve in 2Q26.
• Whether improvements in domestic China consumption and overseas spending continue, especially for Fashion & Leather Goods-related demand.
• Whether US consumer momentum continues to improve as comparison bases get easier and the Takashi Murakami event gradually rolls off.
• Whether management's cost efficiency measures can offset margin pressure from FX and slower revenue growth.
• The contribution of the DFS disposal, Sephora expansion, Tiffany store refreshes, and Bvlgari core lines to segment growth.