Today 4

LVMH edges back to growth on China uptick; fortify Q4 vs FX drag

Bottom Line Impact

Modest top-line reacceleration with disciplined FX and commodity hedging can stabilize margins and reinforce LVMH's leadership as creative refreshes convert into sell-through, positioning the group to regain share as China normalizes.

Key Roles Affected

CFOCEOCMOCOO

Executive Summary

LVMH delivered its first quarterly growth this year, with Q3 revenue up 1% to €18.28b, as Mainland China turned positive and Asia ex-Japan improved. Momentum remains fragile: fashion and leather goods declined 2% year on year but improved from Q2, while Q4 faces FX headwinds and macro uncertainty, requiring disciplined pricing, hedging, and targeted China activation.

Actionable Insights

Immediate Actions (Next 30-90 days)
Increase Q4 FX hedging coverage on USD and CNY exposures to 70-80% and lock key precious metal hedges for the next 2-3 quarters
Rationale: Management flagged FX headwinds; a 100 bps FX drag on €18b quarterly revenue risks €180m top-line and 30-50 bps EBIT margin pressure without hedges
Role affected:CFO
Urgency level:immediate
Front-load holiday campaigns around new creative directions and capsule drops, with 60-70% of paid media concentrated in China and travel retail corridors
Rationale: Converting creative buzz into sell-through can add 100-150 bps to FLG growth; targeting Mainland, Hainan, and key travel nodes maximizes ROI
Role affected:CMO
Urgency level:immediate
Short-term Actions (6-12 months)
Phase a controlled re-entry of entry-priced icons and leather goods in China while preserving scarcity on flagship SKUs
Rationale: Chinese demand has turned positive but remains price-sensitive; a 3-5% mix shift toward accessible SKUs can lift units and traffic without discounting
Role affected:CEO
Urgency level:short-term
Reallocate 5-10% inventory toward Mainland China and Hainan DFS and tighten buy depth in slower US doors by 5%
Rationale: Aligning stock to demand pockets can lift sell-through by 200-300 bps and reduce markdown exposure into January
Role affected:COO
Urgency level:short-term

Strategic Analysis

Next 30-90 days: prioritize FX protection into holiday peak, tactical assortment shifts toward Chinese demand reacceleration, and acceleration of new creative drops to convert attention into sell-through. Calibrate entry-price architecture to support volume without diluting top-end scarcity; reallocate 5-10% incremental inventory to Mainland China and Hainan duty-free where demand has re-accelerated.

Over 6-12 months, a U-shaped China recovery plus creative leadership changes at Dior, Celine, Loewe, and Fendi can restore higher-margin growth if supported by disciplined price-mix and tight distribution. Jewelry margins face precious metal inflation; proactive sourcing and hedging can protect 100-200 bps of gross margin. Sephora and Beauty can anchor group resilience while Fashion normalizes.

Hermes continues to benefit from superior pricing power and waitlist-driven scarcity; Kering is mid-turnaround at Gucci; Richemont leans into hard luxury with margin sensitivity to metal costs. LVMH's early growth inflection and creative refresh position the group to regain share as demand stabilizes, provided FLG recovers and FX drag is contained.

Suppliers face tighter lead times to support faster creative calendars; prioritize tier-1 partners for leather and jewelry components. Precious metal cost volatility elevates COGS in jewelry; expand hedging and recycled input usage. Wholesale remains selective; owned retail and Sephora omnichannel will carry holiday volume, requiring precise staffing and fulfillment agility.

Risks & Opportunities

Primary Risks

  • FX volatility in Q4 compresses reported growth and margins despite stable underlying demand
  • China recovery stalls due to real estate stress and consumer confidence setbacks
  • Precious metal inflation elevates jewelry COGS, pressuring margin if not hedged

Primary Opportunities

  • Creative resets at Dior, Celine, Loewe, and Fendi catalyze demand and traffic in H1-H2
  • Sephora omnichannel strength offsets softness in FLG and drives cross-category acquisition
  • Targeted entry-priced icons in China expand volume without brand dilution

Market Context

The sector is emerging from a prolonged post-pandemic slowdown, with China stabilizing and investors turning incrementally positive. Gen-Z and aspirational shoppers are trading toward accessible price points and novelty, pressuring pure price-led growth. Sustainability and material costs are rising in importance, especially in jewelry. Versus peers, Hermes remains most resilient; Kering is in brand repair; Richemont benefits from hard luxury but faces metal cost sensitivity. LVMH's early growth return and breadth across fashion, jewelry, wines & spirits, and beauty offer diversification, but FLG recovery and FX management are critical to outperformance.

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