Today 4

Gold at record highs tests LVMH jewelry margins; pricing power is pivotal

Bottom Line Impact

Without decisive hedging, mix shift, and calibrated pricing, LVMH and peers face 50–150 bps margin compression over the next 2–3 quarters, risking earnings volatility and share underperformance; executed well, margins can be stabilized while reinforcing top-of-pyramid brand equity.

Executive Summary

A record gold price above $4,000/oz, U.S. tariff headwinds, and a weaker dollar are converging to pressure LVMH’s Watches & Jewelry margins just as Fashion & Leather Goods growth softens. Near-term defense hinges on calibrated price increases, hedging, and mix-shift to gemstone-led/high-jewelry; execution will determine whether margin erosion is contained to tens of basis points or becomes a multi-quarter drag.

Actionable Insights

Immediate Actions (Next 30-90 days)
Lock a 12-month rolling gold hedging program covering 60–80% of forecast needs with layered forwards/leases; set trigger bands at $3,800/$4,200 to opportunistically top up.
Rationale: Caps input volatility and provides pricing visibility to execute planned increases without repeated repricing.
Role affected:CFO
Urgency level:immediate
Drive a holiday high-jewelry and bespoke activation calendar in top 20 doors and private-client channels to shift mix +300–500 bps; enforce zero discounting and clienteling for trade-up.
Rationale: Mix-led margin defense leverages segments with lowest elasticity and highest brand equity reinforcement.
Role affected:CEO/Head of Retail
Urgency level:immediate
Short-term Actions (6-12 months)
Execute a tiered pricing architecture: +2% now on gemstone-led/high-jewelry and icons, +1–2% on mid-tier in 60 days; preserve key entry thresholds via design tweaks (gram weight -8–12%) and gemstone substitution.
Rationale: Offsets material inflation while protecting demand at elastic entry points and sustaining AUR growth.
Role affected:CMO/Chief Merchandising Officer
Urgency level:short-term
Increase recycled/traceable gold to 75–90% of volume; adopt supplier consignment and extend terms by 15–20 days; standardize lightweighting techniques across core SKUs.
Rationale: Reduces effective gold exposure, improves working capital, and aligns with ESG-driven willingness to pay.
Role affected:COO/Chief Procurement
Urgency level:short-term

Strategic Analysis

Next 30–90 days: expect 50–120 bps gross margin pressure in Watches & Jewelry absent action. Implement staggered 2–3% price increases on new receipts (prioritize gemstone-led and iconic lines), lift high-jewelry eventing into holiday, and secure 50–70% of 12-month gold needs via layered hedges to cap input volatility. Maintain promotional discipline to protect brand equity while actively managing store-level mix.

6–12 months: structural hedging and supplier consignment can stabilize COGS; design re-engineering to reduce gold gram weight by 8–12% while maintaining perceived heft becomes a priority. Mix should pivot 300–500 bps toward high-jewelry and gemstone-led pieces where gold is a smaller value driver. U.S. tariff exposure may accelerate selective onshoring/nearshoring and recycled/traceable gold adoption (70%+ of volume) to de-risk supply and support ESG-led pricing power.

Richemont’s Cartier/Van Cleef skew to high-jewelry offers better insulation and pricing power; LVMH must leverage Bulgari/Tiffany brand equity and retail control to match mix-driven margin defense. Mid-market players (e.g., Pandora) face higher elasticity, creating whitespace for top-of-pyramid storytelling. Watch brands with steel-heavy assortments are less exposed; gold-case watchmakers will intensify scarcity and limited editions to justify pricing.

Suppliers/refiners face tighter payment terms, greater demand for recycled/traceable gold, and more consignment/metal leasing. Wholesale partners may see reduced allocations of entry SKUs to protect DTC margins. Customers will encounter stealth price steps and lighter-weight designs; demand risk is highest for entry gold pieces ($1k–$5k) in the U.S. and China aspirational segments.

Risks & Opportunities

Primary Risks

  • Gold sustains >$4,000/oz or spikes further, overwhelming gradual price pass-through.
  • USD weakness vs EUR persists, reducing translated U.S. profits and complicating U.S. pricing amid tariff costs.
  • Demand elasticity at entry price points triggers volume decline and potential channel inventory build.

Primary Opportunities

  • Accelerate high-jewelry, bespoke, and gemstone-led assortments where gold is a smaller cost component.
  • Differentiate with recycled/traceable gold leadership to justify price and deepen client trust.
  • Leverage scarcity/limited editions and private-client events to expand AUR and waitlists.

Market Context

China’s aspirational consumer remains cautious, reducing elasticity for entry jewelry; U.S. discretionary demand is uneven as the dollar weakens and tariff uncertainty rises; Europe benefits from tourism but is sensitive to FX. Gen-Z’s value equation emphasizes authenticity and sustainability, supporting recycled/traceable gold adoption. Versus peers, Richemont’s high-jewelry skew offers greater insulation; LVMH must rely on brand equity (Tiffany/Bulgari), retail control, and procurement scale to defend margins while Kering continues to build jewelry scale but with less immediate pricing leverage.

Back to LVMH All Companies