Core Viewpoint - The European luxury goods industry is facing significant challenges due to currency fluctuations and tariff policies, leading to a decline in stock prices for major luxury groups and a slowdown in market growth [3][4][7]. Group 1: Market Performance - Major luxury groups such as LVMH, Hermès, Richemont, and Kering have seen stock price declines of 26.31%, 17.98%, 19.84%, and 13.33% respectively over the past six months [3]. - The MSCI Europe Textile, Apparel, and Luxury Goods Total Return Index has dropped 17% year-to-date, underperforming the broader market by 27% [3]. - NDR's report indicates that the luxury goods sector's growth is slowing, partly due to the fading benefits of favorable exchange rates and the impact of U.S. tariff policies on global consumer confidence [3][4]. Group 2: Financial Results - LVMH reported a 4% decline in revenue and a 22% drop in net profit for the first half of the year, with recurring operating profit down 15% [7]. - Kering's second-quarter sales fell 15% to €3.7 billion, with Gucci's sales down 25% to €1.46 billion [7]. - Hermès experienced an 8% sales growth in the first half, significantly lower than the 15% growth reported in the previous year [7]. Group 3: Structural Challenges - The luxury goods sector is facing deeper structural challenges, including weak consumer confidence and brand value dilution, leading to a loss of approximately 50 million consumers over the past two years [11][12]. - The Z generation has seen a 7% decline in sales, equating to a loss of $5.7 billion in consumption, marking the largest drop among all generations [11]. - High-net-worth individuals are becoming more discerning in their luxury purchases, focusing on value and personalized services [11]. Group 4: Future Outlook - Bernstein has revised its global luxury goods revenue growth forecast for 2025 from an increase of 5% to a decrease of 2% [12]. - UBS estimates that luxury brands have increased prices by an average of 33% from 2019 to 2023, which may have overstretched market tolerance [12]. - Following a trade agreement between the U.S. and Europe, a 15% baseline tariff on luxury goods imported from Europe is expected to raise prices in the U.S. by an average of 2% and globally by about 1% [12].

Core Insights - LVMH is facing its most severe industry downturn in 36 years under the leadership of Bernard Arnault, with significant challenges impacting its luxury brand empire [2][3][5] Group 1: Industry Challenges - The personal luxury goods market, valued at €364 billion, is rapidly declining, revealing vulnerabilities in LVMH compared to more resilient competitors like Hermès [3][5] - The crisis is exacerbated by LVMH's past acquisition spree, which has led to management complexities and investor concerns regarding succession planning [4][11] Group 2: Financial Performance - LVMH's stock price has nearly halved since its peak in April 2023, resulting in a market value loss of approximately €221 billion [5] - The company has lost its title as France's most valuable company to Hermès, highlighting the shift in market dynamics [5] Group 3: Brand Performance - The wine and spirits division, particularly Moët Hennessy, is experiencing significant challenges, including a CEO dismissal and declining sales, leading to layoffs [16][26] - Dior, LVMH's second-largest fashion brand, has seen a decline in growth, prompting a leadership change to revitalize its performance [20][22] Group 4: Strategic Moves - LVMH has begun divesting underperforming brands, such as Off-White and Stella McCartney, and is expected to continue evaluating its assets, particularly in the wine and spirits sector [15][25] - The company is exploring potential restructuring and strategic realignment to address the current market challenges [10][14] Group 5: Succession Planning - Bernard Arnault's family holds significant control over LVMH, with a focus on ensuring the family's continued influence in the company's future [19][30] - The lack of a clear succession plan raises concerns among investors, despite the establishment of a mid-term succession strategy [36][37]