LVMH Shares Fall to Five-Year Low — Bernstein Points to Stalled Recovery in China's Luxury Segment

LVMH shares fell 2.4% on Thursday, hitting their lowest level in the past five years. The decline came after investment firm Bernstein stated that the "modest" recovery in luxury spending in China observed over the past four quarters could stall again.

Bernstein analysts, led by Luca Solca, cut their third-quarter organic growth forecast for the luxury sector by 110 basis points to 4.9%. The second-quarter growth forecast had been 6.3%. Additionally, the organic growth forecast for the sector for 2026 was lowered by 40 basis points to 5.1%.

Analysts examined sales data from luxury shopping malls in mainland China and noted that growth sharply slowed in June and July 2026 — across various price segments and categories. In July alone, sales fell 12%.

This result followed essentially zero growth in the first quarter and low single-digit growth in the second quarter.

China's economic troubles continue to weigh on the luxury sector

According to Bernstein's assessment, the current situation marks the fourth stall in China's luxury sector recovery since the pandemic.

"We have already seen three false starts — at the end of 2023, the end of 2024, and the end of 2025," the analysts state.

In each case, the market held expectations that stimulus measures announced by the government would support a sustained economic recovery. However, these hopes ultimately faded amid structural problems, falling real estate prices, and prolonged deflation.

Bernstein also cited the tightening of tax policy in China as a possible additional factor. According to analysts' estimates, increased scrutiny of Chinese citizens' offshore assets and the growing risk of stricter tax enforcement could have a "chilling effect" on spending by high-income consumers.

This is particularly significant for the luxury sector, as spending by high-net-worth consumers has recently been one of the rare bright spots in demand for luxury goods.

LVMH's forecasts lowered

Bernstein cut its organic sales growth forecasts for LVMH for 2026 and 2027 by 66 basis points. In addition, the company's earnings per share (EPS) forecast was reduced by 1% for 2026 and by 6.1% for 2027.

Despite the weaker outlook, Bernstein maintained its "Outperform" rating on LVMH shares and kept its price target at €570.

According to analysts, sustaining the recovery in LVMH's Fashion & Leather Goods segment will require Louis Vuitton to re-engage middle-class consumers. They estimate that this will likely require the company to adjust its product assortment and price mix in the second half of 2026.

Forecasts for other luxury brands also lowered

Bernstein also cut its growth forecasts for Kering and Hermès, while leaving its estimates for Richemont unchanged.

The more optimistic view on Richemont is linked to the "relative resilience" of the jewelry brands within the company in mainland China.

Bernstein named Richemont its "Best Idea" in the luxury sector, while noting that Kering has the greatest near-term potential for improvement through price cuts at Gucci and consolidation of its retail network.