LVMH reported second-half 2025 operating results that surpassed consensus estimates on profitability even as some top-line lines showed modest softness. The luxury goods group delivered EBIT of €8.7 billion, a 2% decline from the prior-year period but 7% ahead of analyst expectations.
Profitability metrics in the period remained robust. LVMH's gross profit margin stood at 66.24%, and its price-to-earnings ratio was reported at 24.7, according to InvestingPro data. The company also posted a Financial Health score classified as "GOOD" with a value of 2.53 from InvestingPro, a mark driven by strength in profitability measures.
Management's ability to rein in costs contributed to the better-than-expected EBIT result. Reported costs declined 1% on a constant currency basis, which supported a year-over-year improvement of 60 basis points in the second-half EBIT margin.
Revenue and division performance
Group revenue for the fourth quarter of 2025 grew 1% organically, matching market expectations overall. However, the Fashion & Leather Goods division underperformed relative to forecasts, falling 3% versus analyst projections that had anticipated a 1% decrease.
Analyst reactions and guidance changes
BofA Securities reiterated a Buy rating on LVMH and set a price target of €750. The bank cited a "unique balance between cyclical upside and self-help" that it believes is not fully reflected in current market sentiment or positioning. At the same time, BofA trimmed its earnings-per-share estimates for LVMH by 1-3% for the 2026-2028 period, attributing the reductions to higher French taxes and foreign exchange adjustments. BofA also emphasized improved underlying momentum in the Fashion & Leather division on both two-year and six-year compound annual growth rate measures.
Other sell-side moves were mixed. Kepler Cheuvreux lowered its price target to €680, pointing to higher taxes and rising financial expenses as drivers behind reduced EPS forecasts for 2026-2028. Morgan Stanley downgraded LVMH from Overweight to Equalweight, setting a price target of €635 and flagging valuation risks as shares have re-rated materially since summer 2025, trading toward the higher end of their historical range. By contrast, TD Cowen lifted its price target to €700, noting stabilizing conditions in China and resilience in the U.S. market; TD Cowen also revised its fourth-quarter organic sales estimate to flat, versus a broader expectation of a 0.5% decline.
Implications and context
The mix of stronger-than-expected profitability and cautious EPS revisions from brokers highlights the tension between operating momentum and macro or structural headwinds such as taxes and currency moves. While EBIT outperformance points to operational leverage and cost discipline, the uneven performance across divisions and the range of analyst responses underscore differing assessments of near-term growth and valuation.
Investors and market participants will likely weigh LVMH's demonstrated margin resilience against the potential earnings drag from higher taxation and FX dynamics as brokerages continue to adjust their models and price targets.