LVMH’s $167 bln unravelling faces tricky restitch

Hermes International SCA

05/10/2026 15:50

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, Oct 6 (Reuters Breakingviews) - Three years ago, Bernard Arnault’s luxury empire became the first European company to cross $500 billion in market value. Today it is worth less than half of that, with more than $167 billion wiped off its stock price this year alone. Recovering the old magic requires the 77-year-old to change a formula that made him spectacularly successful.
Arnault has run LVMH LVMH.PA since 1989 and, as chairman and CEO, remains unusually hands-on. Through Agache, his family owns 49% of LVMH but controls 65% of the votes; all five of his children work there. At most large companies, a loss of this much market value would trigger calls to replace the chief executive. At LVMH, minority shareholders can do little but hope the man who designed the strategy can devise a better one - even if that means undoing some of his own handiwork.
Arnault presides over more than 75 brands spanning Louis Vuitton bags, Moët champagne, Hennessy cognac and TAG Heuer watches. Yet most of its profits come from a surprisingly narrow base. Fashion and Leather Goods, which sells handbags, clothing, shoes and accessories under brands including Louis Vuitton and Fendi, generated roughly three-quarters of recurring operating profit last year, and UBS estimates Vuitton alone contributes more than half. The division also relies heavily on Asia. In 2025, 35% of its revenue came from Asia excluding Japan, compared to 18% from the US. UBS estimates Chinese consumers account for nearly a third of divisional sales. That leaves LVMH's fortunes dependent on one giant brand and Chinese shoppers. 
For years, that worked brilliantly. Chinese demand boomed, wealthy shoppers swallowed repeated price rises and Vuitton’s cachet let Arnault push the brand upmarket. Luxury goods prices rose an average 54% between the end of 2019 and September 2024, HSBC estimated. Between 2019 and 2023, LVMH’s sales jumped from €54 billion to €86 billion, while its recurring operating margin rose about five percentage points to 26.5%.
Then the machine began to sputter. In late 2024, LVMH reported its first quarterly sales decline since the pandemic as Chinese demand weakened. Fashion and Leather Goods shrank 1% in 2024 and 5% in 2025. Arnault cannot take all the blame: Hermès International HRMS.PA shares are down roughly as much this year and Kering PRTP.PA is also under pressure. Yet Richemont CFR.S and L’Oréal OREP.PA have gained. That raises the question: are shoppers unable to afford luxury, or choosing to spend elsewhere?
China offers part of the answer. Bain estimates the personal luxury market - spanning beauty, fashion, leather goods, jewellery and watches - shrank 18% to 20% in 2024 and another 3% to 5% in 2025; leather goods were weaker still, falling 8% to 11% last year. Property weakness and job worries have hurt confidence, while local brands have gained ground through stronger cultural relevance and perceived value. A 2026 Oliver Wyman survey found 37% of affluent Chinese consumers planned to spend more on prestige beauty, against 4% for leather goods. L’Oréal’s Luxe business, which sells premium skincare, makeup and fragrances, grew 10% in China in its latest reported quarter.
Richemont points to another shift. Its Jewellery Maisons, including Cartier and Van Cleef & Arpels, generate more than 70% of group sales and grew 14% at constant exchange rates in the year to March. Jewellery is expensive but may retain value. Handbags sit awkwardly in the middle: pricier than beauty, but without jewellery’s clearer store-of-value appeal. What has changed is shoppers’ willingness to accept repeated price rises without matching perceived value.
LVMH has also stumbled in China. Louis Vuitton sued drinks chain Molly Tea over a flower-like logo; a Chinese court ordered the Shenzhen-based company to pay damages, but online users and state media pushed back, arguing the motif drew on traditional Chinese designs. Jefferies says the incident had a particularly severe effect on Vuitton’s China sales.
Not everything inside LVMH is struggling. UBS says Dior and Loro Piana outperformed in the second quarter, while Vuitton grew broadly in line with Fashion and Leather Goods. The US is doing much of the heavy lifting, though its smaller scale limits the benefit. Jefferies expects Fashion and Leather Goods sales in the US to grow 5% in the third quarter, against a 10% decline in its Chinese cluster.
Arnault is adjusting cautiously. LVMH is doubling down on desirability through better stores, creative renewal and product innovation rather than materially lowering prices. Rivals are testing price more openly. Chanel has introduced smooth-leather bags below its classic quilted products, while Gucci has cut prices roughly 20% to 30% on several handbag lines, Bernstein says. Privately owned Chanel does not publish interim results, though Bloomberg reported that first-half comparable sales rose about 16%. Bernstein says Gucci’s cuts have attracted first-time buyers previously priced out.
A cheaper Vuitton entry point need not wreck the economics: Bernstein models a hypothetical €1,350 bag adding volumes equal to 5% of existing leather-goods sales. In this scenario, average selling prices would fall 1.8%, but volumes would rise 5% and revenue about 3%, or €440 million, assuming sales are incremental. That suggests sacrificing a little price could buy growth.
Arnault cannot easily buy his way out either. LVMH is so large that most Western luxury targets would barely move group growth. Smaller local investments may be more useful: Kering bought an undisclosed minority stake in ICCF, the Shanghai-based group behind luxury label ICICLE, while L’Oréal has backed Chinese fragrance brands To Summer and Documents. Such stakes would not transform earnings, but could sharpen LVMH’s feel for changing tastes.
Investors are already preparing for plenty of disappointment. LVMH’s forward price-to-earnings multiple has fallen from roughly 24 times at the start of the year to around 16 times, while earnings estimates are falling too. One luxury investor told Breakingviews nobody knows when earnings growth will return - without that, it is hard to justify paying the old multiple.
Dior and Loro Piana show desirability has not disappeared, and Vuitton remains one of the world’s strongest brands. But widening its price ladder, rebuilding Chinese relevance and reducing dependence on one profit engine could take years. Arnault has spent almost four decades building a machine that made luxury ever bigger and more expensive, but his hardest task may be deciding how much of that machine needs dismantling.
     
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(Editing by Aimee Donnellan; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))