Today 4

LVMH rebound steadies luxury: fashion improves, US returns, China stabilizes

Bottom Line Impact

Revenue trajectory is stabilizing with low single-digit growth potential and margin protection from price discipline, positioning leaders to gain share while safeguarding brand equity if they resist over-supplying into a fragile recovery.

Key Roles Affected

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Executive Summary

LVMH posted its first organic revenue growth of 2025 in the September quarter, with fashion and leather goods improving materially and the US consumer re-engaging while mainland China turns positive. The recovery is real but fragile, as Chinese outbound spend remains in double-digit decline and investor expectations have reset higher, raising execution risk for peers.

Actionable Insights

Immediate Actions (Next 30-90 days)
Pause broad-based price increases through Q1 2026 and focus on mix elevation via limited high-ticket capsules and service enhancements
Rationale: Elasticity risk remains elevated post price ladder resets; preserving perceived value combats the greedflation narrative while sustaining full-price sell-through
Role affected:CEO
Urgency level:immediate
Shift 10 to 15% of media and clienteling budget from Europe to US and mainland China private-domain channels, with VIC events tied to new designer drops
Rationale: US re-acceleration and China domestic stabilization will yield higher near-term ROI than Europe; designer excitement is a proven traffic and conversion trigger
Role affected:CMO
Urgency level:immediate
Short-term Actions (6-12 months)
Tighten working capital by raising FY 2025 inventory turns target by 0.3 to 0.5x and gate capex by deferring 10 to 15% of non-critical projects until Chinese outbound spending inflects
Rationale: Recovery path is uneven; liquidity flexibility protects margins and optionality if demand moderates or travel recovery slips
Role affected:CFO
Urgency level:short-term
Rebalance allocation toward hero leather SKUs with plus 15% units to top 50 US doors and shift 5 to 8% of units to China flagships; hold waitlist depth at 6 to 8 weeks
Rationale: Near-term demand is concentrated in US and China domestic; disciplined scarcity supports pricing power and protects brand equity
Role affected:COO
Urgency level:short-term

Strategic Analysis

Next 30 to 90 days hinge on holiday sell-through in the US and mainland China; brands should prioritize VIC activation, hold broad price hikes, and rebalance inventory toward Tier 1 US doors and flagship China locations while keeping wholesale shipments tight. Expect lower promotional intensity than 2023 but continued selectivity in allocations as travel retail remains constrained by weak Chinese outbound.

Over 6 to 12 months, base case is a gradual normalization to low single-digit organic growth with margin sensitivity of plus or minus 100 to 150 bps depending on price mix and discount discipline. Chinese travel recovery timing is uncertain; experiential retail and designer-led capsules can offset slower tourist spending, but pricing power must be earned through innovation and service, not taken for granted.

LVMH's early stabilization raises the bar; Hermes remains insulated with structural waitlists, Richemont's jewelry likely holds up better than fashion, and Kering's turnaround will be tested against rising expectations. Mid-tier brands risk markdowns if they chase volume; scale players with strong VIC databases and creative momentum will take share.

Leather and atelier capacity planning shifts from contraction to cautious expansion; suppliers should expect modest order upticks for hero SKUs. Travel retail partners face slower replenishment; department store wholesale remains on allocation. Clients are skewing to timeless leather and statement ready-to-wear drops, rewarding brands with tight assortments and rapid replenishment cycles.

Risks & Opportunities

Primary Risks

  • Investor over-optimism drives pressure for growth, prompting excessive supply or discounting if comps tighten
  • Prolonged double-digit decline in Chinese outbound spending limits high-ticket tourist purchases and travel retail recovery
  • US wealth effect sensitivity to equities and policy shocks, including tariffs, could stall demand

Primary Opportunities

  • Share gains from undercapitalized peers via superior VIC engagement and experiential retail, lifting conversion by 200 to 400 bps
  • Designer refresh cycles at key maisons to catalyze full-price mix and drive AUR without sticker-shock hikes
  • Gradual travel recovery in H2 2025 enabling high-margin tourist sales and improved store productivity

Market Context

The sector is emerging from a broad-based slowdown driven by China softness, US buyer fatigue, and backlash against perceived greedflation. Gen-Z and younger HENRY cohorts remain selective and value service and product authenticity over logo inflation, reinforcing the need for tight assortments and experiential retail. Versus peers, LVMH's breadth and creative momentum provide relative resilience; Hermes continues to outperform structurally, Richemont's hard luxury is steadier, and Kering's recovery is not yet proven, suggesting a barbell market where scale and scarcity outperform.

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