Freedom: LVMH stock discount does not eliminate risks of weak luxury demand

Shares of LVMH are valued at about a 30% discount to Inditex stock based on the price-to-expected earnings ratio. However, investors are in no hurry to buy the luxury holding’s shares: the lower valuation does not offset concerns about future demand, says Freedom’s lead analyst Natalia Milchakova.

LVMH brings together the Louis Vuitton, Dior, Bulgari and other luxury brands. Inditex owns Zara and operates mainly in a more affordable price segment. 

Why the low valuation is not attracting buyers

The comparison is based on the P/E ratio—the relationship between the share price and earnings per share. A 30% discount means that for one unit of expected earnings, LVMH investors pay less than for the same metric at Inditex. Such a gap by itself does not guarantee a rise in the share price: valuation also depends on the business outlook.

In Milchakova’s view, the main reason for caution is weaker demand for expensive goods in China and a number of other Asian countries. It is forcing luxury houses to revise sales plans in a less optimistic direction and cut prices. This could worsen future financial results and is already affecting assessments by global investment banks.

Additional pressure comes from changes in consumer behavior. Some consumers are opting for more affordable brands or pre-owned luxury goods. Against this backdrop, investors doubt whether the industry can return to its previous growth rates. 

What LVMH’s reporting shows

At the same time, the group’s latest results point to some improvement. According to LVMH’s report for the first half of 2026, revenue came to €38.6 billion. Organic growth, excluding the impact of exchange rates and changes in the business scope, reached 2%, and accelerated to 3% in the second quarter.

However, in the key Fashion & Leather Goods division, first-half revenue fell 1% organically. Thus, the improvement in overall results does not yet mean a confident recovery of the core fashion business. 

Sales weakness has persisted for more than a year

Earlier, Freedom Broker reported a decline in LVMH’s quarterly sales. In the first quarter of 2025, the group’s sales fell by 3%, and the Fashion & Leather Goods division by 5%. Even then, the results were weaker than expected amid consumer caution. The current discount shows that the market is still factoring in the risk of a prolonged recovery in demand. 

This is not an individual investment recommendation.