Former LVMH Executive Warns of Tough Year Ahead for Luxury Giant

A former senior executive at LVMH has issued a stark warning about the company’s outlook, citing weakening demand and intensifying trade pressures. The remarks come amid declining sales, restructuring moves, and growing exposure to tariff risks—signaling a volatile period ahead for the world’s largest luxury group.

Ex-Leadership Flags Strategic Headwinds

Pauline Brown, former Chair of LVMH North America, stated in a Bloomberg interview that the group faces “a tough year and a half ahead.” Her comments align with recent results showing broad weakness across LVMH’s key divisions. In Q2 2025, group revenue fell 4% to €19.5 billion, with fashion and leather goods declining 9% year-on-year.

Softening Demand in Core Markets

CFO Céline Cabanis acknowledged muted performance in China, where post-pandemic recovery continues to underwhelm. CEO Bernard Arnault confirmed that momentum worsened after March, prompting leadership to double down on ultra-premium positioning. Analysts point to cyclical headwinds across the high-end segment, particularly as consumers turn more cautious in the face of inflation and economic uncertainty.

Trade Tensions Raise Exposure

Alexandre Arnault, now overseeing the €6 billion wines and spirits division, is tasked with navigating an uphill turnaround just as U.S. tariff risks reemerge. The U.S. remains the unit’s largest market, accounting for over one-third of revenue from champagne and cognac. Further tariff escalation could hit margins and volume, especially if retaliatory measures follow.

To mitigate that risk, LVMH is expanding its U.S. footprint. Plans for a second Louis Vuitton factory in Texas, expected by 2027, reflect a strategic hedge. However, operational challenges at the existing site raise concerns about execution and cost control.

Restructuring at Moët Hennessy

LVMH has begun a strategic overhaul of Moët Hennessy under new leadership. The plan includes cutting 13% of staff, exiting underperforming brands, and refocusing capital on core names like Moët & Chandon and Hennessy. The aim is to reverse a €1.5 billion cash outflow and restore profitability by 2026. The transition follows the departure of former CEO Philippe Schaus earlier this year, underscoring the urgency at headquarters.

Pricing Power Faces Limits

Despite pressure across spirits and beauty, LVMH continues to assert pricing flexibility in ultra-luxury segments. Executives say modest increases of 2–3% are possible without affecting demand at the top end. These price moves are being positioned as necessary to protect margins and offset input cost inflation through 2026.

Tips for Traders

• Monitor LVMH (EPA: MC.PA) stock for downside risk as macro data and U.S. tariff negotiations evolve.

• Watch for updates on Moët Hennessy’s restructuring timeline—brand exits and workforce changes may drive sentiment.

• Track developments related to the Texas production expansion; execution risk and trade strategy are tightly linked.

• Pay close attention to margin commentary in upcoming earnings calls—premium pricing strategy remains key.

• Observe performance of luxury peers like Kering to anticipate sector-wide flows and positioning shifts.