Summary of Key Points
Against the backdrop of overall slowing demand in the luxury goods industry, LVMH’s performance has moved away from its previous double-digit high growth rates and entered a period of stagnation: revenue in the first half of 2026 decreased by 3% year-on-year, while net profit remained unchanged; both revenue and net profit had declined in 2025 as well. To address these challenges, the company has launched the largest restructuring in nearly 40 years, including selling non-core brands such as Marc Jacobs and Fenty Beauty, divesting its duty-free business (DFS Greater China), and cutting staff to control costs, with a focus on core brands like LV and Dior. Although the Chinese market still shows growth, the pace has slowed down. Brands like LV have closed stores to optimize their operations, and the industry as a whole is expected to enter a phase of modest growth, with annual increases in the single digits. The trend of gold prices will be a key factor affecting consumers’ willingness to purchase luxury goods.
Detailed Analysis
1. LVMH’s Performance: From Easy Profits to Tightening Finances
In the past, LVMH expanded rapidly thanks to double-digit growth rates; now it has to rein in its spending. Revenue in the first half of 2026 was 38.6 billion euros, a 3% decrease from the previous year, and net profit was 5.7 billion euros, barely keeping pace with the previous year’s figure. The situation is even more dire: revenue in Q1 dropped by 6%, and for the entire year of 2025, revenue decreased by 5% while net profit fell by 13%. These results come despite layoffs and cost-cutting measures. In the past, price increases would usually lead to increased sales; now, the company has to be much more cautious to maintain its profits, indicating that the era of easy luxury goods profits is truly over.
2. The “Downsizing” Strategy: Selling Unprofitable Brands and Divesting from Duty-Free Business
Why downsize? Because industry demand is weak, and non-core businesses are dragging down overall performance. LVMH plans to sell unprofitable or less important brands to focus its resources on cash-generating brands like LV and Dior. This could be the largest restructuring in nearly 40 years. The company has also restructured its duty-free business, selling DFS Greater China to China National Travel Service Group (CNSCG) and relinquishing duty-free rights at airports in Los Angeles and San Francisco, as well as the DFS operation in Okinawa. This means shedding less profitable sidelines to focus on its core luxury business.
3. The Chinese Market: Growth Still Present, but Slowing Down
The Asian market (excluding Japan), which includes China, grew by 6% in the first half of the year, but growth slowed significantly to 7% in Q1 and only 4% in Q2. Brands like LV have closed stores in locations such as Shanghai’s Bund and Beijing Capital Airport. This is not a sign that the Chinese market is failing; rather, it reflects the excess commercial real estate development in previous years, resulting in too many stores that were not profitable. Now, companies are closing inefficient stores and opening new ones in better locations to focus on quality rather than quantity, aiming to eliminate the excess from past expansion.
4. An Industry Winter Approaching? Slowing Growth, with Gold Prices as a Critical Factor
Morgan Stanley suggests that Chinese consumers’ desire for luxury goods is recovering, but at a slow pace, with annual growth expected to be in the single digits this year, far below the previous double-digit rates. Another important factor is gold prices: if they fall, consumers may shift their spending from gold to luxury goods; if they continue to rise, it will make luxury goods even harder to sell. Therefore, the trend of gold prices directly affects the speed of the luxury market’s recovery.
Conclusion
The luxury goods industry has transitioned from rapid growth to a period of modest growth. LVMH’s downsizing and store closures are not isolated incidents but reflect a collective industry adjustment. In the future, brands will need to focus on more strategic and efficient operations (such as optimizing stores and concentrating on core brands) rather than reckless expansion. Consumers will also be more cautious with their spending, as gold prices and economic confidence will determine whether they continue to invest in luxury goods.