LVMH's third-quarter revenue unexpectedly increased by 1%, with Sephora performing impressively, and ADR surged by 8% | Earnings Report Insights

When the market generally expected luxury goods giant LVMH to deliver another lackluster report, the company unexpectedly stepped on the growth accelerator in the third quarter.

On October 14, LVMH released its financial report, showing a 1% organic revenue growth in the third quarter of 2025, reaching €18.28 billion. Although the increase is modest, it successfully ended two consecutive quarters of decline and significantly exceeded analysts' expectations of "zero growth." Key points from the financial report are as follows:

• Financial Performance: Organic revenue grew 1% to €18.28 billion in the third quarter, ending two consecutive quarters of decline and surpassing analyst expectations; revenue for the first nine months was €58.1 billion, down 4% year-on-year.
• Core Business Progress: The fashion and leather goods segment declined 2% in the third quarter (better than the expected -3.48%), perfumes and cosmetics grew 2%, and selective retailing (including Sephora) saw strong growth of 7%.
• Regional Performance Divergence: Other regions in Asia, including China, grew 2% in the third quarter, the U.S. grew 3%, while Japan declined 13%, and Europe fell 2% due to exchange rate impacts.

Following the better-than-expected financial report, LVMH's ADR stock price surged over 8%. Meanwhile, Gucci owner Kering Group rose 5.67%, and the ADRs of Hermès International and Cartier owner Richemont also increased by 4%, as LVMH is typically seen as an industry leader.

(LVMH's stock price drives a broad rise in the luxury goods sector)

Structural Challenges in Core Business

First and foremost, attention must be paid to the group's profit engine—the fashion and leather goods division. This division, which includes brands like Louis Vuitton and Dior, contributes over two-thirds of the group's profits.

In the third quarter, this division's revenue was €8.5 billion, down 2% year-on-year, while analysts had generally predicted a 4% decline; the actual performance of -2% was interpreted by the market as a sign of "resilience."

For the first nine months, the division's revenue was €27.61 billion, down 8% compared to €29.92 billion in the same period last year.

At the same time, LVMH is undergoing a large-scale creative "rotation," with brands like Dior, Fendi, Celine, and Loewe appointing new creative directors. The debut of the new designers received positive feedback, but whether this can translate into sustained commercial success remains to be seen.

What truly supports overall growth is the outstanding performance of other business segments. The selective retailing segment saw organic growth of 7% to €3.99 billion in the third quarter, mainly due to strong performance from Sephora.

Even the wine and spirits segment, which has been sluggish for two and a half years, benefited from champagne restocking and rosé wine sales in the U.S., unexpectedly achieving a 1% growth, completely reversing the anticipated -3% decline.

Chinese Market: Recovery or a Flash in the Pan?

The performance of the Chinese market has become a key highlight of this quarter's financial report.

LVMH achieved a 2% growth in Asia, including China, which stands in stark contrast to the 9% decline in the first half of the year. CFO Cecile Cabanis stated during the analyst conference call:

Despite the challenging macroeconomic environment, the company has seen encouraging demand in China.

Analysts believe that whether the current recovery momentum in China can be sustained amid an uncertain macroeconomic backdrop is crucial for the direction of the luxury goods industry. In stark contrast, other major markets show divergence:

• The U.S. market (+3%) performed steadily, demonstrating resilience in local demand.
• The European market (-2%) has weakened due to a decline in tourist spending and exchange rate fluctuations.
• The Japanese market (-13%) saw a significant drop mainly because the weak yen last year attracted a large amount of tourist spending, creating a very high comparison base.

Beware of the road ahead; challenges remain

Although the third-quarter financial report brought unexpected surprises, investors should not be overly optimistic.

Cabanis's remarks were quite subtle. She reminded investors that the comparison base for the fourth quarter will be more challenging, but the comparison base for 2026 will be relatively easier. This statement is essentially managing expectations for potential performance fluctuations.

Moreover, macro-level pressures still exist. The strong euro in the third quarter brought a negative impact of up to -5% on the company, directly eroding report revenues denominated in euros. If this trend continues, it will continue to exert pressure on future financial statements.

Analysts believe that although the third-quarter data shows some resilience, investors should remain cautious about LVMH's recovery prospects. After all, a 1% growth rate is almost negligible in the golden age of the luxury goods industry, and the ongoing weakness in core business is a warning signal that cannot be ignored.

From a longer-term perspective, the challenges facing LVMH are not just short-term market fluctuations. The luxury goods industry is undergoing structural adjustments, and changes in consumer behavior, geopolitical uncertainties, and slowing growth in emerging markets are all long-term issues that need to be addressed.