LVMH recently reported a 4 per cent decline in revenue in the first half of the financial year, with consumers in the US and Asia reducing discretionary spending.
As the report from The Economist explains, LVMH’s market value has fallen by more than a quarter over the past year.
Hermès has surpassed LVMH as the most valuable company in the luxury industry. As a result, the Arnault family has been surpassed at the top of France’s rich list for the first time since 2017.
The aggressive launch of Donald Trump’s tariffs highlighted the unique friendship between the US President and LVMH chairman Bernard Arnault. To date, it remains unclear what impact tariffs will have on the European luxury goods conglomerate, with Arnault describing the situation as ‘uncharted waters’.
“Arnault is attempting to steer towards calmer waters. New bosses have been put in charge of the booze, watches and retailing units. The appointment of Jonathan Anderson as the new creative director of Dior has been cheered by fashionistas. Some investors, however, worry that the companies’ problems are deeply rooted,” the report explains.
“One concern is that decades of pushing fancy clothing and accessories not just to the super-rich but also the merely well-off have made LVMH’s brands more vulnerable to economic cycles and dented their image of exclusivity.
“Even Louis Vuitton, the company’s crown jewel, has not been immune. Analysts at HSBC term the brand ‘schizophrenic’ for its attempt to peddle entry-level products such as chocolate and make-up alongside ultra-pricey handbags and luggage.”
The company was also front and centre of the controversial trial of a former head of France’s domestic security services, who was found guilty of using public resources for LVMH in March.
LVMH has also been struck by cybercriminals multiple times this year, with incidents in South Korea and Hong Kong compromising customer data.
Finally, what began as a crowning achievement for LVMH – the showcase of its brands during the 2024 Paris Olympics – eventually faced controversy.
As a major sponsor, LVMH’s branding was a consistent theme across the three-week event, which was viewed by millions worldwide. Chaumet was tasked with creating the Olympic Medals; however, less than one year after the competition closed, more than 100 athletes asked for their ‘crumbling’ medals to be replaced.
“Mr Arnault, aged 76, is navigating all this while making plans for a transition at the helm. He clearly intends to keep the enterprise under family management. All five of his children work in different corners of his empire under the tutelage of experienced executives,” the report continues.
“Mr Arnault refuses to answer questions on the topic of succession. Having raised the age limit for his job from 75 to 80 three years ago, he raised it again to 85 earlier this year. That may mean he will wait until he has steadied the ship before relinquishing control. Even then, some investors question whether it is possible to replace the man who created the modern luxury industry.”
The report concludes: "Mr Arnault still has plenty to do before he hangs up his captain’s hat.”
LVMH oversees the operations of more than 70 brands, including Tiffany & Co., Bulgari, Kering, and TAG Heuer.
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