LVMH’s luxury wobble: What happens when desire dulls

When the world’s largest luxury conglomerate catches a cold, the entire sector feels the chill, they say. That’s the message from LVMH’s latest quarterly earnings, which revealed a 9 per cent decline in fashion and leather goods sales, a sharp contrast to the brand’s post-pandemic boom and a reality check for a market that continues to be in flux.

This is no minor dip. LVMH’s fashion and leather goods division, home to megabrands such as Louis Vuitton, Dior, Celine and Loro Piana, is the group's largest and most profitable business unit. While it may be tempting to dismiss the decline as a cyclical blip, it signals deeper shifts underway in the global luxury ecosystem.

There are bright spots elsewhere: Richemont’s sales were up 6 percent and demand for Hermès and Brunello Cucinelli continue to ride high. These brands offer a contrast in scale and strategy, more narrowly focused and arguably more agile than LVMH’s sprawling portfolio of over 75 houses. The sheer size of the French giant, once its greatest strength, may now be its Achilles’ heel, making it harder to course-correct quickly in a changing landscape.

LVMH’s woes are partly macroeconomic. Growth in China, once the industry’s golden goose, has stalled amid a property market crisis and consumer belt-tightening. In the US, aspirational buyers, a segment who drove much of the post-2020 surge, are retrenching, cautious amid persistent inflation. The looming tariffs and low dollar aren't helping either. Yet beyond the balance sheets lies a another problem: waning cultural relevance.

Luxury is no longer merely about heritage; it’s about emotion, identity, and belief. In a digital era where everything is visible and nothing is sacred, consumers, particularly Gen Z, demand more than logos and lineage. They seek storytelling with substance, values aligned with their own, and pricing that doesn’t feel exploitative. And here, LVMH’s marquee brands may be faltering.

What once connoted exclusivity now feels mass, not in production, but in perception. The rise of logo fatigue, accelerated by the rapid product churn and constant marketing cycles, makes even the most meticulously crafted monogram bags seem like merch.

In LVMH’s earnings call, new CFO Cécile Cabanis pushed back on the notion that affordability should equate to lower price points. “We refuse to do that with cheap bags,” she stated. Instead, Vuitton is focused on “using the firepower and DNA and desirability” to drive entry-level engagement without devaluing the brand.

Entry level pricing threshold

But therein lies the industry’s fundamental dilemma: is it possible to “onboard” the next generation without adjusting the entry threshold? Must every leather bag that costs 200 euros to manufacture be priced at 2,000 euros? When does premium become predatory?

Other brands are already rewriting the rules. Younger shoppers are gravitating to smaller labels such as The Row, Khaite, and Lemaire, names that offer quality, restraint, and a whiff of underground credibility. At the same time, vintage luxury has soared, with platforms like The RealReal, Vestiaire Collective and auction houses seeing consumers hunt for pieces with provenance and fairer price-to-value ratios.

In this climate, LVMH and its peers must re-evaluate the fundamentals. Desire may be priceless, but pricing must still feel justifiable. Elevation alone won't suffice if the product lacks distinction or fails to resonate. In the end, luxury is not defined by what it costs, but by what it means.