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By Mimosa Spencer and Tassilo Hummel

PARIS, Jan 28 (Reuters) - LVMH LVMH.PA has made a good start to 2025, CEO Bernard Arnault said on Tuesday, after the luxury bellwether reported better than expected fourth-quarter sales that will add to hopes the sector has turned a corner.

The owner of Louis Vuitton handbags and Bulgari jewellery said sales for the three months to end-December rose 1% to 23.9 billion euros ($25 billion), as its main fashion and leather division almost matched last year's numbers and sales jumped at its retail unit, which owns cosmetics chain Sephora.

The growth outpaced an expected 1.6% decline, according to a consensus forecast cited by Morgan Stanley.

"2025 has started rather well," Arnault told analysts, citing double-digit growth at its flagship brand Louis Vuitton and jeweller Tiffany.

The results from Europe's largest company by market value provide further signs that the luxury industry is pulling out of a slump.

The sector has been wrestling with its slowest sales in years, with consultancy Bain & Company estimating they fell globally 2% last year, weighed down by China's sluggish economy.

However, Bernstein analysts said performance at LVMH's important fashion and leather business failed "to stand up to upgraded expectations on the back of the recent Richemont major beat".

The group's American Depositary Receipts (ADRs) LVMUY.PK were down 4.5% at $151.68.

LVMH's fashion division, home to its top-earning Louis Vuitton and Dior labels, reported fourth-quarter sales of 11.1 billion euros, a year-on-year decline in organic terms of 1%, but beating a consensus forecast for a 3.3% fall.

The division accounts for almost half of LVMH revenues and three-quarters of its recurring profit.

That compared with Cartier-owner Richemont's robust end-of-year performance, with sales up 10%, lifted by the U.S. market, where luxury players are looking for growth as demand in China remains subdued.

Bernstein pointed to challenges at LVMH's Dior brand, and said it had "work to do" in other areas too.

Dior, led by Bernard's daughter Delphine, grew rapidly during the post-pandemic boom but underperformed expectations last quarter with HSBC estimating it reached 8.5 billion euros in 2024 full-year sales, versus 21.5 billion at Louis Vuitton.

Arnault said Dior faced a "difficult environment", adding he remained confident for the brand, though would not say he was optimistic.

The U.S. market is, however, developing "very dynamically", he said, pointing to "a wave of optimism" in the country.

Arnault and wife Helene Mercier, as well as two of his children, Delphine and Alexandre, attended U.S. President Donald Trump's inauguration last week alongside other billionaires.

The family's prominent placement at the ceremony was seen as a sign it is well positioned to protect its business there despite Trump's threats of import tariffs across industries.

LVMH sales rose 3% last quarter in the U.S. and 4% in Europe, while they declined 10% in the Asia region, less than the 16% drop in the third quarter.

Luxury shares, which have been volatile since the winding down of a post-pandemic boom, have risen sharply since the start of 2025, with Richemont up 25%, Hermes up 15% and LVMH up 19%.

($1 = 0.9580 euros)

(Reporting by Mimosa Spencer and Tassilo Hummel. Additional reporting by Chuck Mikolajczak. Writing by Dominique Patton. Editing by Mark Potter)

((Mimosa.Spencer@thomsonreuters.com;))