RBC lowered its rating on LVMH shares and cut its target price to €475

On Tuesday, RBC Capital Markets downgraded LVMH Moët Hennessy Louis Vuitton shares from "Outperform" to "Sector Perform" and cut its 12-month price target from €575 to €475. According to the brokerage's assessment, the deteriorating macroeconomic environment and weak demand for luxury goods could persist through fiscal year 2027.

RBC lowered its LVMH fiscal 2027 adjusted earnings per share forecast by 10% to €23.03, roughly 9% below market consensus. The firm also cut its revenue forecast by 4%. The 2026 EPS forecast was reduced by 2% to €22.69, while the 2028 estimate was lowered by 12% to €24.30.

According to RBC, pressure on consumer spending is being driven by the Middle East conflict, high oil prices, stock market volatility, and tighter monetary policy.

The brokerage forecasts LVMH's group organic revenue growth at 3.1% for fiscal 2027, compared with market consensus expectations of 4.6% growth. Expectations are particularly weak for the Fashion & Leather Goods division — RBC expects growth of only 1% in this segment, versus a consensus forecast of 4.1%.

Under RBC's scenario, price increases will boost revenue by 2%, though a 1% decline in sales volume will offset part of this effect, while the impact of product and geographic mix is expected to be roughly neutral.

A decline in profitability is also expected. RBC forecasts LVMH's adjusted operating margin at 21.7% for fiscal 2027, 80 basis points below consensus. By 2028, the gap is expected to widen to 120 basis points, according to the firm's estimates.

RBC notes that the high share of fixed costs in LVMH's cost structure makes the company's profits particularly sensitive to a slowdown in revenue growth. The brokerage estimates that LVMH shares are trading at 17.5 times RBC's 2027 EPS forecast.

RBC also expects LVMH's third-quarter results, due around October 14, to show organic revenue growth for the group of just 1%. Revenue from Fashion & Leather Goods could decline organically by 2%.