LVMH shares set for biggest drop in over a year on fading recovery hopes

LVMH shares fall as much as 6.7% in early trade

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Luxury stocks have rallied recently on recovery hopes

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LVMH beat Q4 sales forecast, but margin pressured

PARIS, Jan 29 (Reuters) - Shares in LVMH were on track for their largest drop in 14 months on Wednesday after the luxury goods group's latest sales figures disappointed investors hoping for stronger signs of a rebound at the sector bellwether.

The home of Louis Vuitton fashions and Bulgari jewellery reported a 1% rise in fourth-quarter sales, beating estimates. But its margin was weighed down by higher costs, with management mostly citing one-off events like increased staff costs linked to the Paris 2024 Olympics and an employee share scheme.

Shares in Europe's most valuable company fell as much as 6.7% in early trade and were down 5% at 1200 GMT. The underwhelming update follows a string of strong releases from rivals and a recovery rally that lifted LVMH shares more than 30% from the more than two-year low hit in November.

Gucci-owner Kering was down 6%. Hermes, which is seen as best-placed to weather downturns thanks to a wealthier customer base, was up 0.1%, close to record levels.

While fourth-quarter sales from LVMH's key fashion and leather division, home to its top-earning Louis Vuitton and Dior labels, were around 2 percentage points higher than expectations, the beat was likely "not enough to call this an inflection point," said Citi analyst Thomas Chauvet.

The luxury goods sector has been grappling with its slowest sales in years, with a 2% fall last year according to Bain & Company estimates, hit by a property crisis in China.

But recent expectation-beating results from firms including Cartier owner Richemont and Burberry have fuelled hopes the sector is starting the year on firmer ground.

While LVMH's results "challenge the sector narrative that all luxury companies have seen the acceleration" seen at Richemont and Burberry, it reinforces the idea of a quicker recovery this year than expected in October, Deutsche Bank analysts said in a note to clients.

Luxury shares, which have been volatile since the winding down of a post-pandemic boom, have risen since the start of 2025, with Richemont up 25% and Hermes up 15%.