The luxury industry is on the brink of a dramatic comeback, and savvy consumers and investors alike are eager to spot the trends that will define this revival. But here's where it gets intriguing: while many are watching, only a few will pinpoint the brands and products that truly embody the spirit of the times. Among them, Bernard Arnault’s LVMH stands out as a beacon for those seeking to capitalize on this shift.
The early signs of this turnaround emerged in LVMH’s third-quarter sales, which hinted at a broader recovery in the luxury sector. While revenues in its flagship fashion and leather goods division—home to iconic names like Louis Vuitton and Dior—dipped by 2%, this decline is a marked improvement from the 9% drop in the previous quarter. And this is the part most people miss: this slowdown in the rate of decline suggests we might finally be approaching the bottom of the luxury spending cycle.
A rebound in luxury would be a welcome development for the entire industry, and it’s no surprise that LVMH’s recent performance not only boosted its own stock by 14% but also lifted shares of competitors like Hermes, Burberry, and Kering, the parent company of Gucci. However, LVMH is poised to reap the lion’s share of the benefits.
One key reason is its dominance in categories like handbags and apparel, particularly through its powerhouse brand Louis Vuitton. These segments are expected to outperform luxury jewelry, which has been the stronger performer in recent years. According to RBC analysis, jewelry grew by 4% annually between 2022 and 2025, while 'soft' luxury—think fashion and leather goods—remained stagnant. This creates a prime opportunity for the latter to catch up.
Adding to this optimism, fashion and leather goods brands have taken steps to enhance their value proposition, addressing concerns over steep price hikes and lackluster designs. Here’s a bold statement: even in the world of luxury, where customers pay thousands for meticulously crafted items, the concept of 'value for money' matters. Even the ultra-wealthy want to feel their purchases are justified, not just extravagant.
The industry has responded by moderating price increases, and LVMH’s recent growth was driven more by volume than by higher mark-ups. Bernstein analysis highlights that broader inflation has caught up with LVMH’s price adjustments in key markets like France and the U.S. Meanwhile, fresh design talent is generating excitement, as seen in recent fashion weeks. (https://cnaluxury.channelnewsasia.com/obsessions/milan-paris-fashion-week-designer-debuts-260276)
That said, the upcoming luxury upswing won’t match the post-pandemic boom. It will take time for brands to raise prices aggressively while maintaining high sales volumes. LVMH isn’t the only player positioned to benefit from this revival; others, like Gucci under Demna Gvasalia, are also showing promise. But here’s the controversial part: while LVMH’s stock has struggled during the downturn, falling below its historical premium relative to the S&P Global Luxury Index, it remains better positioned than competitors like Kering and Burberry, whose turnarounds are already priced into their shares.
LVMH’s financial strength, though less visible during downturns, gives it a distinct advantage when the cycle shifts. While throwing money at problems doesn’t guarantee success, having the resources to back its vision puts LVMH in a strong position for the future.
Thought-provoking question for you: As the luxury industry rebounds, will LVMH’s dominance continue, or will smaller players like Gucci and Burberry challenge its supremacy? Share your thoughts in the comments—we’d love to hear your take on this evolving landscape.
