Despite a tough macro backdrop, the world’s largest luxury group posted solid numbers in 2025.
Fashion & Leather Goods, its core profit engine, declined only 5% organically. Watches & Jewelry actually grew +3%. And in the second half of the year, most segments improved: Selective Retailing grew +7% organically, and even Wines & Spirits, which had been under pressure, softened its decline from –7% in H1 to –4% in H2.
So the business is holding up. Cash flows are strong. Margins are healthy.
But the stock? Down double digits for the year.
This disconnect between solid execution and fading investor confidence has become the central question for LVMH today. It’s not about what’s wrong with the company. It’s about what the market is now asking of luxury: faster growth, new stories, or just time to cool off.
This is a look at that gap. Why the numbers say strength and the stock says wait.
Growth is stabilising. Margins are still strong. But the narrative has shifted.
On paper, 2025 wasn’t a bad year. LVMH’s total revenue fell 1% organically which is essentially flat. That’s not exciting, but it’s far from a breakdown.
Growth even turned positive in the second half (+1% H2 vs –3% in H1), with notable improvement in Watches & Jewelry (+5%) and Selective Retailing (+7%). Fashion & Leather Goods, the group’s powerhouse, ended the year down 5% organically – a slowdown, but not a collapse.
Margins told a similar story. Operating margin came in at 22%, only slightly below 2024’s 23.1%. Perfumes & Cosmetics improved profitability. Selective Retailing saw a major jump in earnings, thanks to Sephora and a turnaround at DFS. Overall profit from recurring operations was €17.8 billion – down 9%, but still near historic highs.
So what’s the issue?
The problem isn’t what LVMH is doing. It’s how the market is reading the next phase.
Investors are no longer treating luxury as a guaranteed growth story. High base effects from the post-COVID boom, a slow China recovery, normalization in the U.S., and forex pressure from a strong euro have all reset expectations. The question isn’t whether LVMH is still executing – it is. The question is: where does the next leg of growth come from?
That’s the broader dynamic across the industry. Brands with pricing power are finding that annual increases don’t land as easily. Tourist flows have returned, but not uniformly. And in key categories like fashion, watches, and spirits, the step-change narrative, the kind that justifies premium multiples, is missing.
Luxury is still profitable. But it’s no longer in hypergrowth. And that’s the turn the market is digesting.
The big levers: China, currency, and a normalised U.S. consumer
Luxury doesn’t sell in a vacuum. And in 2025, three macro levers drove most of the deceleration across the industry including at LVMH.
1. China Is Back but Just Not All the Way
Much of the optimism heading into 2025 hinged on a full Chinese rebound. It didn’t materialize. Travel resumed, but local consumption lagged. The hoped-for “revenge spending” phase gave way to a more cautious, regionally uneven recovery.
At LVMH, this showed up in the numbers: Asia (excluding Japan) was down 11% in Q1, but barely scraped into positive territory by Q4. Watches & Jewelry, which includes strong brands like Bulgari and Tiffany, held up thanks to Chinese demand for hard luxury. But in fashion and beauty, the recovery was slower than expected, especially in the middle of the market.
And this wasn’t just about travel. Luxury shoppers in China increasingly split into two profiles: the ultra-rich (still buying), and a broader aspirational class that is more cautious and increasingly tempted by rising local brands. For companies that over-indexed to China or priced too aggressively, this shift cut deeper.
2. Currency Went from Tailwind to Headwind
For years, luxury’s global footprint benefited from currency swings. In 2025, that reversed. The euro strengthened against the U.S. dollar, yen, and renminbi, which hit reported revenue and profits even when sales volumes held steady.
LVMH estimated that exchange rates alone shaved 3 points off revenue growth and took more than €1 billion off profit. Operating margins fell by 1.1 points – a meaningful drop entirely attributable to FX. That drag doesn’t reflect poor execution. But it does reinforce a broader market frustration: the optics of revenue and profit declining, even when the core business is fine.
3. The U.S. Consumer Has Landed
After two years of stimulus-driven spending, the U.S. luxury consumer, especially at the aspirational end, is now back to earth. Demand is still there, but it’s more measured. Experiences are back in favor. High-end travel and dining have taken share from discretionary fashion. And price sensitivity is more visible than it was in 2021–2022.
This didn’t cause a collapse at LVMH. In fact, the U.S. remained one of its most stable regions. But it wasn’t enough to offset weaker spots elsewhere. And with volumes flat or declining, price increases as the main driver of growth in recent years became harder to pass through.
Fashion softened, watches held, beauty steadied, retail rebounded
For a group as broad as LVMH, headline numbers never tell the whole story. Each category faced different pressures and revealed different signals about where demand is holding up or shifting.
Fashion & Leather Goods: Still the Anchor, Just Not a Growth Engine Right Now
This is LVMH’s largest and most profitable division, home to Louis Vuitton, Dior, Fendi, Celine, and more. In 2025, Fashion & Leather Goods revenue fell 5% organically but most of that came in H1. By the second half, the decline had narrowed to –3%.
Margins stayed exceptional. The segment still contributed the bulk of group profit and maintained a 35%+ operating margin. But the growth narrative has cooled. A high base from 2022–23, normalization in U.S. demand, and only gradual reacceleration in China left the numbers looking flat – solid, but not explosive.
Behind the scenes, LVMH kept investing: new store formats, a refreshed menswear strategy at Vuitton under Pharrell, and a creative reset at Dior. But those bets take time to show up in revenue. For now, the market is in wait-and-see mode.
Wines & Spirits: Cognac Weighed It Down
This was the weakest performer. Revenue dropped 5% organically, with softness in both Hennessy (cognac) and Glenmorangie (whiskies). The U.S. market, still dealing with high channel inventories, cut back sharply. China, usually a key growth engine for premium spirits, also lagged. Operating profit fell 25%.
LVMH chose not to chase volume. Instead, it protected brand equity, held price, and let distributors clear stock. Long term, that’s smart. Short term, it shows up as a drag.
Watches & Jewelry: A Decent Win
The only product category to grow in 2025. Revenue rose 3% organically, with strength in both jewelry (Bulgari, Tiffany) and watches (TAG Heuer, Hublot). Growth was especially visible in Asia and the U.S., where demand for “hard luxury” held up better than in fashion.
Margins were stable around 14%, and this segment helped cushion the group’s overall performance. It’s not flashy, but in 2025, this was one of LVMH’s best stories.
Perfumes & Cosmetics: Flat Revenue, Improved Profit
Sales stayed flat organically, but operating profit rose 8%. That’s thanks to a tighter distribution strategy and continued success of key franchises like Dior’s Sauvage and J’adore, along with growing skincare and makeup traction in Asia.
Margins are still below group average (~9%), but improving. LVMH isn’t pushing volume here. It’s optimizing mix and avoiding discount channels and it’s paying off.
Selective Retailing: The Rebound Story
This was the sleeper hit. Sephora had a very strong year, with gains in market share and store traffic. DFS (the travel retail business) returned to profitability after years of losses. The segment posted 4% organic growth and a 28% jump in profit.
Travel retail is back especially in Asia and Sephora’s global expansion continues to deliver. This was the most cyclical part of LVMH in 2020–2022. Now, it’s the part rebounding the fastest.
A good business in a market that’s looking elsewhere
LVMH didn’t miss in 2025. It simply didn’t outperform in a way that moves markets anymore.
Growth is stabilizing. Margins are still strong. The business remains diversified, well-run, and structurally advantaged. But after three years of surging demand, the story has shifted from acceleration to digestion. And the market is impatient by nature has moved ahead of the numbers.
Investors aren’t selling because they doubt LVMH’s brands. They’re selling because the step-change isn’t obvious. Fashion is slowing from a high base. Spirits are absorbing a downcycle. China is recovering, but slowly. And pricing power once a guaranteed lever now carries more friction.
This is what a rerating looks like. Not a collapse, just a quiet repricing of expectations. A shift from “how fast can it grow?” to “how long can it compound?”
In time, LVMH will likely answer that as it has before with scale, creativity, and consistency. But for now, the market is asking a different question. Not about execution, but about narrative.
And the stock may won’t move until that narrative shifts again. Who knows.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions.
Note: This article relies on data from fund reports, index history, and public disclosures. We have used our own assumptions for analysis and illustrations.
Parth Parikh has over a decade of experience in finance, research, and portfolio strategy. He currently leads Organic Growth and Content at Vested Finance, where he drives investor education, community building, and multi-channel content initiatives across global investing products such as US Stocks and ETFs, Global Funds, Private Markets, and Managed Portfolios.