Hermes crowned the new Empire of Luxury

Picture Credit: theedgesingapore.com

LVMH, the titan behind brands like Louis Vuitton, Dior, and Sephora, lost its position as Europe’s most valuable luxury company this week. Rival Hermès overtook LVMH in market capitalization after the latter reported disappointing first-quarter results, sparking concerns about the health of the global luxury sector.

Shares of LVMH dropped 7% following weaker-than-expected sales, particularly in the U.S. and China. The company’s market value fell to €246 billion, just below Hermès at €247 billion. The dip reflects not only underperformance but also changing investor sentiment, according to Morningstar’s Jelena Sokolova. She noted Hermès’ resilience stems from its wealthier customer base and tighter production controls, which shield it from broader market volatility.

Hermès, known for its ultra-exclusive Birkin and Kelly bags, has limited annual production growth to 6-7%, maintaining high demand. In contrast, LVMH’s broader exposure to middle-market luxury items has made it more vulnerable during this downturn.

Picture Credit: businessoffashion.com

Flavio Cereda of GAM called the shift “telling of the post, post-Covid world,” suggesting that while LVMH benefitted greatly during the luxury boom of recent years, it now faces a harder road. The U.S. slowdown, weak Chinese demand, and looming trade tensions—particularly after tariff threats from former President Donald Trump—have compounded investor worries.

The luxury sector at large is feeling the strain. LVMH’s decline led sector-wide losses, dragging down shares of Kering, Richemont, and Prada. Analysts have revised their 2025 luxury sales forecasts downward, with Bernstein now predicting a 2% contraction—potentially the worst performance in over 20 years. What once seemed like a brief slump now hints at a prolonged downturn for high-end fashion.