LVMH and the Future of Luxury | Growth Stalls Amid Rising Costs

After a sharp post pandemic rebound, the luxury market is now encountering challenges. Analysts primarily monitor personal luxury goods, excluding sectors like automobiles, services, and food.

📉 First decline in 17 years: The personal luxury goods sector contracted by 2% in 2024, reaching $381 billion the first downturn outside of COVID since 2008. While long-term growth prospects remain, near-term obstacles persist.

🇨🇳 China’s slowdown: Once a powerhouse for growth, China’s luxury market declined by about 20% in 2024, impacted by economic strain and a shift toward local brands, posing challenges for global luxury players.

🚪50 million fewer luxury buyers: Higher prices have pushed many, especially younger consumers, out of the market. Gen Z’s enthusiasm for luxury brands is fading, raising concerns about future demand.

💰Price resistance emerges:Luxury prices in Europe have surged 52% since 2019, but consumers are now pushing back. Even affluent shoppers are either trading down or questioning the value, particularly in handbags and leather goods.

📱Digital isn’t a cure all: AI driven personalization is growing, but Bain emphasizes that "luxury is a feeling." Brands must balance technology with personalized, high-touch experiences to maintain desirability

🏛️Return to fundamentals: Bain advises luxury brands to refocus on craftsmanship, creativity, and exclusivity—the pillars that sustain pricing power and brand value over time

🔮Slower growth ahead: The industry’s growth rate is expected to stay below 4% CAGR over the next five years.

Top Luxury Brands of 2024

1. Louis Vuitton – $130 billion
2. Hermès – $94 billion
3. Chanel – $60 billion
4. Gucci – $24 billion
5. Dior – $12 billion
6. Cartier – $11 billion
7. Rolex – $9 billion
8. Saint Laurent (YSL) – $7 billion
9. Tiffany & Co – $6 billion
10. Prada – $5 billion

Luxury Market Leaders in 2025

LVMH, Europe’s largest company, owns Louis Vuitton, Dior, and Tiffany & Co. The biggest luxury firms by market capitalization in February 2025 are:

LVMH 🇫🇷 $371 billion
Hermès 🇫🇷 $310 billion
L’Oréal 🇫🇷 $192 billion
EssilorLuxottica 🇫🇷 $140 billion
Richemont 🇨🇭 $118 billion
Kering 🇫🇷 $36 billion

Also Nike remains the most valuable non European apparel brand at $108 billion

Though not always categorized as luxury, L’Oréal and EssilorLuxottica generate significant revenue from premium goods. L’Oréal Luxe alone reported €15.6 billion in FY24 revenue more than Hermès’ total revenue (€15.2 billion)

Noteworthy Trends

👜 Fashion & Leather Goods Struggle: Sales dropped 3% year over year, and profits declined 10%. Despite representing 48% of revenue, this segment contributes 78% of operating profit.

🇨🇳 China’s ongoing drag: Sales in Asia (excluding Japan) fell 12.5%, with China’s Q4 revenue down 10% YoY. CEO Bernard Arnault expects a gradual, not rapid, recovery.

🌍Mixed regional performance: While China lagged, Japan grew 18%, Europe and the U.S. posted moderate gains, and wines & spirits underperformed globally.

📉Shrinking margins: Operating profit declined 14% YoY to €18.9 billion due to rising labor costs and limited price increases.

📊Record marketing expenses: LVMH spent €31 billion on marketing and selling, exceeding its product costs.

🏷️Dior faces price resistance: Analysts note that Dior’s aggressive pricing strategy has made it less attractive compared to competitors.

💍Jewelry remains strong: Tiffany’s sales grew unexpectedly by 9%, signaling steady demand in this category.

🔮Cautious optimism for 2025: Arnault acknowledged the challenges but highlighted Louis Vuitton’s double-digit growth at the start of the year, partly driven by a Zendaya x Murakami campaign.

LVMH’s sluggish performance in fashion and leather goods indicates continued pressure on soft luxury, while jewelry and selective retail categories show resilience. China’s recovery remains slow, but Japan provides a bright spot. Investors had hoped for a stronger rebound, and LVMH’s stock is still at levels seen nearly four years ago.