LVMH share price continued to struggle this month, hovering near its lowest level since December 2020. The stock is down more than 54% from its 2023 peak, erasing billions of dollars in value as market capitalization has fallen from €439 billion to about €189 billion. Over the past 12 months, the slide has also cut Bernard Arnault’s wealth by more than $45 billion, to $132 billion.
LVMH under pressure as top business slows
LVMH Moët Hennessy Louis Vuitton, the biggest luxury group in the world, has come under pressure this year. This retreat has coincided with the performance of other luxury brands, with Hermes having dropped by 54% from its highest point last year.
Kering stock dropped to €213, down by over 70% from its all-time high. In the UK, Burberry dropped to 1,025p, also much lower than the record high of 2,452p. In total, the ongoing sell-off in luxury goods companies has erased billions of dollars in value.
LVMH stock dropped after releasing its financial results this week. This report showed that its organic revenue rose by just 2% in the first nine months of the year, with its biggest market, fashion & leather goods falling by 4% to €26.39 billion.
LVMH’s perfumes and cosmetics business also continued slowing, with its revenue falling by 2% to €5.9 billion. Selective retailing’s business also weakened by about 1%. These weaknesses were offset by the growth in its wines and spirits and watches and jewellery businesses.
Most of LVMH’s weakness is being driven by the Chinese business, where demand for luxury products has continued to wane. Sadly, this performance is expected to continue in the foreseeable future as consumers prioritize debt payments after the collapse of the real estate sector. Competition from local brands, including Chow Tai Fook, Laopu Gold, Shang Xia, and Bosideng, continues to rise.
On the positive side, demand from the United States and Japan has continued to grow. In the US, sales rose by 4% in the first nine months of the year. Japan and Asia sales rose by 5% and 3% in this period.
There are also concerns that LVMH is overvalued, with its trailing price-to-earnings ratio of 18, being slightly higher than the DAX Index’s average of 17.
LVMH share price technical analysis
The weekly chart shows that the LVMH stock has been in a strong sell-off, moving from a record high of €845 in May 2023 to the current €384. It has already moved below the important support level of €428, its lowest level in June this year. Moving below that level invalidated the double-bottom pattern.
The stock has formed a series of lower lows and lower highs. It has remained below all moving averages, while the Average Directional Index (ADX) has moved to 24, a sign that the trend is continuing to rise.
The stock has also remained below the Supertrend indicator, a sign that bears remained in control for now. Therefore, the sell-off will likely continue in the near term, with the next key target to watch being at €350.
The alternative scenario is where the stock rebounds and retests the resistance at €428. A break-and-retest pattern is one of the most common continuation sign.