Planning to buy a Louis Vuitton bag? Hang on! This luxury brand has finally dethroned LV
A popular luxury brand has surpassed LVMH as Europe's most valuable luxury house due to LVMH's disappointing Q1 performance, which saw shares plunge and market capitalization fall. Investors are re-evaluating their positions as the top brand's focus on ultra-high-end clientele provides resilience against economic downturns. LVMH's broader portfolio exposes it to vulnerabilities in the mid-range luxury market, impacting the entire sector. Click to know which brand it is
In a dramatic market shift,
Hermès
has overtaken
LVMH
to become Europe's most valuable luxury house by
market capitalisation
, following a disappointing first-quarter performance from the
Louis Vuitton
and Dior parent company. The baton change signals a deeper recalibration in the luxury sector, where brand positioning and clientele now count for more than ever.
LVMH shares plunged by 7% on Tuesday, wiping out billions in value and pushing the group's market cap down to €246 billion, just below Hermès, which now leads at €247 billion. The tumble follows weaker-than-expected Q1 revenues, largely driven by softer spending in the US, where shoppers pulled back on beauty products and cognac, and continued sluggishness in China.
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The result? Investors are rethinking their bets.
"While valuations can swing, this shift reflects diverging investor sentiment and performance trajectories,' said Jelena Sokolova, Senior Equity Analyst at Morningstar. 'Hermès' strength lies in its ultra-high-end clientele-less sensitive to economic downturns, whereas LVMH plays across a broader spectrum.'
Hermès' disciplined approach, with its $10,000+ Birkin and Kelly bags and tightly controlled production (capped at 6-7% growth annually), has helped insulate it from the volatility that's currently shaking the broader luxury market.
By contrast, LVMH's broader portfolio-including Louis Vuitton, Dior, Tiffany & Co., and Sephora, means greater exposure to mid-range luxury, which is proving more vulnerable. As Flavio Cereda of GAM Luxury Brands noted, 'There's short-term pain ahead. Vuitton's middle-market focus is the weak spot.'
The ripple effects were visible across the sector. Gucci-owner Kering dipped 2%, Richemont (home to Cartier) slipped 0.7%, Prada dropped 4.2%, and even Hermès slid slightly down 0.3%.
LVMH's 3% sales decline starkly missed analysts' forecasts of 2% growth. RBC's Piral Dadhania slashed his full-year growth forecast from 3% to zero, citing growing pressure on luxury consumption following new US tariffs and looming recession fears.
The Q1 miss has cast doubt on earlier hopes of a luxury rebound in late 2024. Deutsche Bank flagged a return to 5% sales declines in LVMH's once-bulletproof fashion and leather goods segment.
Adding to the gloom, Bernstein analysts revised their 2025 sector outlook, predicting a 2% decline instead of the earlier 5% growth, signalling what could be the luxury industry's longest slump in over 20 years.
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