The Resurgence of Luxury: Momentum Investing and Valuation Resilience in a Post-LVMH Surge

The luxury goods sector has recently experienced a striking rebound, driven by LVMH's 13% stock price surge following its Q3 2025 resultsLVMH 3Q results^[1]. This performance not only signaled a return to organic growth for the French conglomerate but also catalyzed a broader rally across peer companies, reigniting investor confidence in an industry long shadowed by macroeconomic uncertainty. For momentum investors, the event underscores the sector's valuation resilience and its potential to outperform in a fragmented market landscape.

LVMH's Q3 2025: A Catalyst for Sector Momentum

LVMH's third-quarter results marked a pivotal turning point. Organic sales grew 1% year-on-year, reversing two consecutive quarters of declineLVMH 3Q results^[1]. The fashion and leather goods division, a cornerstone of LVMH's portfolio, outperformed expectations with a 2% revenue decline-far better than the 4% contraction analysts had forecastLuxury Market Size, Share & Trends, 2025-2033^[5]. This resilience was fueled by strong demand in the U.S. and Asia (excluding Japan), where brands like Dior and Loewe leveraged creative innovation to sustain consumer interestLVMH: Improvement in trends in the third quarter of 2025^[4]. Meanwhile, the Selective Retailing unit, including Sephora and Rhode, delivered 7% organic growth, highlighting the power of diversified retail strategiesChristian Dior - Public Comps and Valuation Multiples^[2].

The market's reaction was immediate and robust. LVMH's shares surged 13%, while the Stoxx Europe Luxury 10 index climbed 3.5%LVMH 3Q results^[1]. Peer companies followed suit: Christian Dior's stock rose 13%, Kering gained 6%, and Burberry advanced 7%LVMH 3Q results^[1]. These gains reflect a broader re-rating of the sector, as investors recalibrated expectations for luxury brands' ability to navigate inflationary pressures and shifting consumer preferences.

Valuation Resilience: Metrics That Matter

LVMH's valuation metrics further reinforce its appeal. As of Q3 2025, the company trades at a trailing P/E of 24.22 and an EV/EBITDA of 12.30, significantly lower than Kering's 50.31 trailing P/E and 13.10 EV/EBITDALVMH (EPA:MC) Statistics & Valuation Metrics - Stock^[6]. Christian Dior, a LVMH subsidiary, commands a P/E of 17.5x and an EV/EBITDA of 4.4xChristian Dior - Public Comps and Valuation Multiples^[2], while Burberry's EV/EBITDA of 13.71 exceeds the industry average of 12.70xLVMH 3Q results^[1]. These disparities suggest LVMH's valuation remains more attractive relative to peers, particularly given its consistent cash flow generation and dominant market share.

Sector-Wide Implications: Momentum and Fragmentation

The luxury sector's recovery, however, is not uniform. While LVMH and Dior demonstrated resilience, peers like Gucci (under Kering) and Capri Holdings faced significant declines, underscoring the industry's fragmentationLuxury Brands Grapple With Shifting Tastes, Economic Headwinds^[3]. This divergence highlights the importance of brand strength and strategic adaptability. LVMH's focus on innovation-such as Rhode's digital-first approach and Sephora's AI-driven personalization-has set a benchmark for leveraging technology to enhance desirabilityLVMH: Improvement in trends in the third quarter of 2025^[4].

Moreover, demographic shifts are reshaping demand. Older consumers, who control a disproportionate share of global wealth, are proving less price-sensitive than younger cohortsLuxury Brands Grapple With Shifting Tastes, Economic Headwinds^[3]. This trend aligns with LVMH's emphasis on "experiential luxury," where high-end services and bespoke offerings drive valueLuxury Market Size, Share & Trends, 2025-2033^[5]. Analysts project that regions like Japan, the Middle East, and India will lead growth through 2027LVMH: Improvement in trends in the third quarter of 2025^[4], further diversifying the sector's revenue base.

The Case for Momentum Investing

For momentum investors, LVMH's Q3 performance and the subsequent sector rally present a compelling case. The company's ability to outperform expectations in a challenging macroeconomic environment-despite a 2% contraction in the global personal luxury goods market in 2024Luxury Brands Grapple With Shifting Tastes, Economic Headwinds^[3]-demonstrates operational agility. Its valuation metrics, while elevated, remain justified by robust free cash flow and a 23.1% operating margin at DiorChristian Dior - Public Comps and Valuation Multiples^[2].

Historical backtesting of LVMH's earnings beats since 2022 reveals a nuanced pattern: while the median 10-day excess return after a beat is –0.4%, the cumulative abnormal return (CAR) turns positive by day 8 and reaches +5.5% by day 30-outperforming the +1.6% benchmarkLVMH 3Q results^[1]. The win rate for such events crosses 60% from day 7 onward, peaking at 80% by day 28–30LVMH 3Q results^[1]. These findings suggest that a patient, long-term approach to LVMH's earnings surprises may yield superior returns, despite initial market underreaction.

Critically, the sector's long-term fundamentals remain intact. The global luxury market is projected to grow at a 4.7% CAGR through 2033Christian Dior - Public Comps and Valuation Multiples^[2], driven by aspirational demand and the integration of sustainability and AI-driven personalizationLuxury Market Size, Share & Trends, 2025-2033^[5]. LVMH's strategic investments in these areas position it to capitalize on these trends, reinforcing its role as a bellwether for the sector.

Conclusion: A New Era of Resilience

LVMH's 13% stock surge is more than a short-term anomaly-it is a harbinger of the luxury sector's renewed resilience. By combining operational discipline, creative innovation, and strategic diversification, the company has redefined what is possible in a high-margin, low-volume industry. For investors, the key takeaway is clear: momentum in luxury is not just about chasing price action but understanding the structural forces that underpin valuation durability. As the sector navigates macroeconomic turbulence, LVMH and its peers offer a blueprint for sustainable growth in an increasingly fragmented market.