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“In periods when the economic climate is more difficult, when the market slows down, which is the … More
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Luxury market leader LVMH just reported a disappointing first half 2025, with total revenues down 4% to $46.7 billion (€39.8 billion) from $48.9 billion (€41.7 billion) last year. Those results weren’t too alarming since numerous industry analysts have forecast a luxury market slowdown in 2025.
More troublesome is that the revenue decline accelerated as the year progressed from 2% in the first quarter to 7% in the second ended June 30. And profitability is down, with net profits declining 22% to $6.9 billion in the first half.
But most disturbing, the fashion and leather goods segment – one of LVMH’s five reporting segments that generated just about half of LVMH revenues last year – fell an alarming 4% (or 5% organically) in the first quarter and 12% in the second to end the first half off 8% to $22.4 billion on a reported basis.
In a statement, Chairman and CEO Bernard Arnault put a positive spin on the news, emphasizing LVMH showed “solidity in the current context” of geopolitical and economic disruptions.
“Beyond the prevailing uncertainties, we remain focused thanks to the long-term vision that has always guided our family group,” he said and reassured investors, “We head into the second half of the year with great vigilance.”
Extended Turbulence Ahead
LVMH finds itself in unfamiliar territory, being on the losing end of a market slowdown. It didn’t miss a beat during the last global luxury market downturn in 2008/2009 and, excluding 2020, it has steadily grown since then. That was until 2024.
Last year, revenues dropped 2% to $99.4 billion and profits declined 17% to $14.7 billion, driven by a downturn in its chief money maker: fashion and leather goods, down 3% to $48.2 billion and net profits from recurring operations dropping 10%.
For the remainder of 2025, the company provided no financial guidance, stressing the market’s uncertain environment. That said, Bain in association with Altagamma is predicting a decline of up to 5% in the global luxury market this year.
Yet, when the industry’s juggernaut – LVMH – sees its flagship segment experiencing such a dramatic 8% decline through the first half of the year, Bain’s forecast could be optimistic.
“The global luxury sector this year confronts its most far-reaching disruptions – and its biggest potential setbacks for at least 15 years – amid mounting economic turbulence, alongside complex social and cultural shifts,” Bain reported and ominously warned, “Turbulence is set to be the sector’s new baseline for an extended period.”
Path Forward
Despite the financial headwinds, LVMH will stay the course, powered by its long-term strategy of carefully nurturing the creativity and craftsmanship of the 75 iconic luxury brands in its portfolio.
New Creative Directions
With so much riding on its fashion and leather goods segment, two of its premier brands – Christian Dior and Loewe – have new fashion directors, but it will take time for their influence to translate into sales.
Dior’s Jonathan Anderson has just shown his first men’s collection, sparking excitement about his upcoming women’s collection, set to debut this fall at Paris Fashion Week. At the same show, Loewe’s Jack McCollough and Lazaro Hernandez will introduce their first collection.
Tarnished Brands
On the flip side, Loro Piana is caught in an expanding controversy surrounding allegations of worker abuse in the luxury supply chain. Loro Piana is the fifth luxury brand – and LVMH’s second after Dior in 2024 – to suffer reputational damage that threatens to taint not only the brands involved, but also the entire luxury industry.
Management noted that Dior experienced continued “softness” and underperformed its segment since then. According to TD Cowen’s estimates, Dior contributes between 20% and 25% of revenue to the fashion and leather goods segment. And LVMH’s prized jewel, the Louis Vuitton brand, makes up about half.
Louis Vuitton Crossroads
While LVMH doesn’t report brand sales, it stands to reason that Louis Vuitton has nosedived recently too. Cowen sees it facing increased competitive pressure from upstart “quiet luxury” leather brands such as Cuyna, Patou and Polène in the $700 to $2,000 price range. LVMH, through its partnership with L Catterton, has a minority stake in Polène, which reportedly doubled sales in the last year.
To counter their incursion, Cowen recommends Louis Vuitton invest in innovation and improved quality at the brand’s lower price points, which start at in the low $2,000s.
But is that enough when even the ubiquitous Neverfull bag is largely priced out of reach for many of the so-called aspirational luxury consumers – traditionally the bag’s prime target demographic – who face mounting financial pressures?
Bain reports the luxury market lost 50 million aspirational customers between 2022 and 2024 and those who remain are shifting spending to wellness, second-hand luxury – Neverfull bags are widely available at accessible price points second-hand – and trading down to more affordable fashion brands. Coach, for example, ended its third quarter up 13% and acquired 1.5 million new customers in North America, mostly next generation GenZ and Millennials.
Louis Vuitton’s Vulnerabilities
A new report from EY, examining the aspirational luxury customer segment, described the challenge for legacy luxury brands, like Louis Vuitton, in the current market where aspirationals, previously the industry’s growth consumer segment, pull back, while the far more selective high-net-worth consumers continue to spend.
“The more desirable a brand becomes, the more sales grow, the more people wear brands, the less desirable the brand becomes,” it explained, and that is a key challenge for Louis Vuitton.
Ironically, Louis Vuitton finds itself in a position best expressed by the mythic ouroboros symbol – the serpent that eats its own tail. Strategies that fueled growth over the years have turned against it, threatening to erode its continued mystique, particularly among luxury’s highest potential clientele.
Or as BCG and partner Altagamma wrote in their latest report on the global luxury market, “In a race for scale, some of the soul of luxury was lost, as much of the industry traded exclusivity for reach, exchanging stability for volatility.”
BCG also noted that brands with more than 50% of their client base made up of aspirational consumers are seeing the sharpest declines in sales.
Mitigating Factors
CEO Bernard Arnault, now Europe’s wealthiest individual and the seventh richest man in the world, according to Forbes, holds plenty of levers to see his company through the current downturn. He is working feverishly with European leaders to avert a trade war with the U.S. and the 30% tariff on EU imports that could kick in on August 1, the Wall Street Journal reports.
With the U.S. accounting for 25% of revenues in the first half, he also announced plans to open a second Texas factory by early 2027 to keep on the right side of his long-time friend President Trump. Besides the current Johnson County, TX factory that opened in 2019, the company also operates two others in California.
And the Wall Street Journal just reported that LVMH is shopping the Marc Jacobs brand to bring in $1 billion, off the $1.4 billion Prada is paying Capri Holdings for the Versace brand.
Authentic Brands Group, which also owns Reebok, is said to be in the running, as are WHP Global, which acquired Vera Wang for an undisclosed sum earlier this year to add to its Rag & Bone and Joe’s Jean’s holdings, and Bluestar Alliance, that acquired the Off-White brands from LVMH late last year.
Wait And See
Investment advisor TD Cowen downgraded LVMH stock from Buy to Hold in April, and it remains unchanged, citing weakness across LVMH’s portfolio during the first half and limited visibility on a near-term rebound.
Besides the 8% shortfall in the fashion and leather goods segment, LVMH’s second largest, selective retail, including Sephora and Le Bon Marché, was flat at $10.1 billion, while watches and jewelry, its third largest, anchored by Tiffany, Bulgari and TAG Heuer, was off 1% to $6 billion, followed by perfumes and cosmetics, also down 1% to $4.8 billion.
Its smallest segment, wine and spirits, at $3 billion, and dependent on the U.S. market for 35% of revenues, fell 8% in the first half.
Arnault has ruled out selling this business, but confided to the WSJ that he plans to simplify the unit’s structure and concentrate on its flagship brands, which include Dom Pérignon, Moët & Chandon, Veuve Clicquot and Krug champagnes, Hennessy cognac, Belvedere vodka, Glenmorangie whisky and numerous wine brands.
In conclusion, Cowen stated that it doesn’t expect to have clearer visibility on LVMH until after the second half of the year, signaling renewed growth may not materialize until 2026 or beyond.
In the meantime, Arnault is doubling down. Far from being deterred, he is embracing the current adversity as a catalyst for innovation and ultimate transformation, as he shared with the WSJ: “In periods when the economic climate is more difficult, when the market slows down, which is the case today, we tend to come out stronger.”
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