LVMH, the parent company of LV, posted a net profit of 5.69 billion euros in the first half of the year.

Against the backdrop of a sluggish overall consumer environment, the luxury goods business has become increasingly challenging.

For a very long time in the past, multiple price hikes per year by leading luxury brands including LV and Gucci were the industry norm. Yet over the past two years, even top-tier luxury brands have begun to grapple with the predicament of overstocked inventory and mounting sales pressure.

Recently, LVMH Group, the parent company of LV, released its financial report for the first half of 2026. The earnings report shows that LVMH Group recorded revenue of 38.64 billion euros (approximately 43.93 billion U.S. dollars) in the first half of the year, down 3% year on year on a reported basis, with organic revenue up 2% year on year; recurring operating profit stood at 8.69 billion euros, down 4% year on year; the group's net profit reached 5.69 billion euros (approximately 6.559 billion U.S. dollars), largely flat year on year.

It is worth noting that LVMH's core Fashion & Leather Goods division delivered relatively weak performance. Financial figures indicate that the division generated revenue of 18.146 billion euros in the first half of the year, down 5% year on year on a reported basis and 1% year on year on an organic basis. Even as the overall business faces headwinds, there are still structural bright spots in this earnings report.

Data shows that LVMH's Fashion & Leather Goods division posted 1% year-on-year organic revenue growth in the second quarter, putting an end to the seven-consecutive-quarter decline previously recorded.

As early as last year, LVMH Group Chief Financial Officer Cécile Cabanis explicitly stated that the market should not expect all luxury segments to recover in lockstep, as hard luxury categories consistently outperform fashion and leather goods in their ability to resist cyclical downturns and market fluctuations.

Bernard Arnault, Chairman of LVMH Group, also predicted three years ago that the luxury industry is inherently cyclical, and the group needs to prepare in advance for the trend of slowing industry growth. Judging from the latest performance results, this prediction has come to fruition.

By regional performance, revenue in the Asia market (excluding Japan) recorded 6% year-on-year organic growth in the first half of the year, lifting its contribution to the group's total revenue from 28% in the same period last year to 29%; revenue in the U.S. market rose 4% year on year; revenue in the Japan market increased 5% year on year; revenue in the Europe market fell 1% year on year.

Cécile Cabanis, LVMH Group Chief Financial Officer, admitted that measured from a historical perspective, the local consumption level in China remains at a relatively high level.

Bernard Arnault, Chairman and Chief Executive Officer of LVMH Group, said that the growth rebound of the Fashion & Leather Goods division in the second quarter is mainly attributable to the strong operating performance of Louis Vuitton's new flagship stores in Beijing and Seoul. Meanwhile, under the leadership of new creative director Jonathan Anderson, Dior has continued to see rising design vitality and brand popularity.

In the secondary market, LVMH Group's share price has fallen by more than 26% in total so far this year, and its U.S.-listed ADR (LVMUY) has dropped by more than 24% year to date, indicating persistently weak performance in the capital market. Affected by the share price correction, the paper wealth of Bernard Arnault and his family has shrunk significantly. According to the 2026 Forbes Global Billionaires List, Bernard Arnault and his family rank 7th globally with a fortune of 1.71 trillion U.S. dollars.

Has the bottom cycle come to an end?

A comprehensive review of earnings reports from major luxury groups shows that hard luxury segments such as jewelry and high-end watchmaking boast outstanding performance resilience, while the fashion and leather goods business sees more significant performance fluctuations due to the impact of the consumer environment.

Previously, supported by the global consumption dividend, especially the strong growth of the Asia market, the fashion and leather goods business of brands including LV and Hermès relied on continuous price hikes to drive growth for years. But starting from 2024, this single growth model of raising prices has completely failed.

Some industry media pointed out that price reduction promotions have been observed for some LV products since the beginning of this year. For high-end luxury goods, price cuts are often a signal of declining industry prosperity.

Overall, LVMH Group delivered stable performance in the first half of the year, with both bright spots and pressures coexisting. It is worth noting that against the backdrop of slight pressure on revenue, the group's operating profit margin remained stable at 22.5%, largely flat with the same period of the previous year, far exceeding analysts' expectation of 21.7%. In addition, affected by exchange rate fluctuations, the group incurred a loss of about 700 million euros in the first half of the year. Excluding this disruptive factor, the group's overall operating performance would be even more impressive.

For the market outlook in the subsequent period, Bernard Arnault, LVMH Chairman, publicly stated that the group has regained confidence in the market recovery in the second half of the year.

By segment, LVMH's Selective Retailing division recorded 5% organic growth, the Wines & Spirits division posted 5% year-on-year growth, the Perfumes & Cosmetics division saw largely flat revenue, and the pattern of differentiated performance across the group's internal businesses continues.

The regional growth structure also shows obvious differentiation. The U.S. market has become the group's largest growth engine at present, with second-quarter sales up 6% year on year. The group believes that the new wealth generated by the boom of the AI industry and the technology sector has greatly boosted local high-end consumption purchasing power. At the same time, benefiting from the depreciation of the yen and the recovery of inbound tourist flows, revenue in the Japan market rose 14% year on year in the second quarter.

As the single core market with the highest global weight for LVMH, consumption in the China market remains sluggish. Some industry analysts stated directly that there are no obvious signs of recovery in the China region's business in the first half of the year.

In response to the current situation of the China market, Cécile Cabanis, LVMH Group Chief Financial Officer, explained that the overall domestic consumption level is still at a historically high level, but consumers are acting more rationally at present, with consumption demand increasingly concentrated on major promotion nodes and key marketing periods, and daily consumption frequency has declined to some extent.

Meanwhile, LVMH is launching its largest asset downsizing and structural optimization drive in nearly 40 years. In May 2026, the group accelerated the divestment of non-core assets covering low-efficiency businesses including fashion, beauty and overseas wineries. Among them, the Marc Jacobs brand has been sold for 850 million U.S. dollars, ending a nearly 30-year partnership between the two parties.

On the domestic offline channel front, LVMH has continued to optimize its store layout over the past two years, and has closed multiple stores including the chocolate specialty store at Shanghai Qiantan Taikoo Li, the Beijing Capital Airport store, the Kunming Golden Eagle Times Square store, and the Chengdu Tianfu International Airport store. Industry insiders believe that LVMH has completely abandoned the large-scale store expansion model, and its core strategy at this stage is focused on ultra-high-net-worth customers, and exploring the lifetime value of high-net-worth users has become its core development main line in the China market.

After the release of the earnings report, major investment banks gave differentiated ratings. Bernstein stated that there is still uncertainty about whether the current recovery strength can support share price rebounds and drive valuation repair, but it maintained LVMH's "buy" rating and target price of 600 euros; Royal Bank of Canada defined this earnings report as a "reassuring interim report", while raising doubts about the performance expectation for the second half of the year, arguing that under the pressure of a high base, it is very difficult for the market consensus expectation to be fulfilled, and finally maintained the "buy" rating, lowering the target price from 600 euros to 575 euros.

Performance of luxury giants continues to diverge

Looking at the global luxury industry as a whole, although the overall market remains under pressure, industry divergence is still the most core market feature at present.

Compared with LVMH, Hermès delivers more stable and resilient performance against downward headwinds. Earnings reports show that Hermès Group recorded revenue of 8.16 billion euros in the first half of the year, up 6.1% year on year; recurring operating profit reached 3.35 billion euros, with an operating profit margin as high as 41.0%; among which the core Leather Goods and Saddlery division generated revenue of 3.76 billion euros, up 9.8% year on year; the group's net profit in the first half of the year hit 2.238 billion euros.

In the second quarter alone, Hermès' sales reached 4.1 billion euros, up 6.7% year on year at constant exchange rates, a slight increase from the growth rate in the first quarter. The leather goods division, which accounts for nearly half of total revenue, posted 10% year-on-year revenue growth in the second quarter, slightly below the market expectation of 10.8%.

Axel Dumas, Executive Chairman of Hermès, said that the group's stable performance in the first half of 2026 confirms the brand appeal and consumer recognition of its 16 major product lines. Relying on its unique handicraft model, the company maintains sound financial indicators and is full of confidence in the industry recovery and its own performance growth in the second half of the year.

Regarding the China market, he admitted: "The Chinese consumer market has now stabilized, but no obvious recovery and improvement have been seen. Our operating posture in the domestic market is stabilizing, but we have not returned to the previous high-growth momentum." Data shows that Hermès recorded revenue of 3.533 billion euros in the Asia-Pacific market (excluding Japan) in the first half of the year, up 2.4% year on year at constant exchange rates, and the group's overall business is more dependent on the China market than its industry peers.

Compared with LVMH and Hermès, Kering faces more prominent overall operating pressures. Earnings reports show that Kering generated revenue of 7.220 billion euros in the first half of the year, down 3% year on year on a reported basis and up 1% year on year on a comparable basis. Core brand Gucci's comparable sales in the first half of the year fell 5% year on year. Even though the decline narrowed to 2% in the second quarter, positive growth was still not achieved. The group's attributable net profit in the first half of the year was only 189 million euros, plummeting 60% year on year; recurring operating profit stood at 921 million euros, with an operating profit margin of only 12.8%.

In terms of regional data, the Asia-Pacific market with China as the core contributed 30% of Kering's revenue in the first half of the year, but the regional directly operated retail business fell 3% year on year. Among them, Gucci's comparable sales in the Asia-Pacific market dropped 10% year on year, and the Chinese mainland market is still in a downward range, but the month-on-month decline has narrowed significantly.

Luca de Meo, Chief Executive Officer of Kering, said that the management team has traveled to China to work with local teams to roll out special optimization plans, with the core idea of returning to the essence of consumption and reconstructing business strategies centered on customer demand. The company made it clear that the old growth model driven by continuous price hikes has completely failed, and the top priority at this stage is to reactivate Chinese consumers' brand recognition and willingness to spend.

Richemont, the leading hard luxury group, delivered very strong performance. Data shows that in the first quarter of fiscal 2027 (as of June 30, 2026), the group's sales reached 6.33 billion euros, up 20% year on year at constant exchange rates. Combined with the data for the first quarter of 2026, the group's total revenue in the first half of the year hit 11.729 billion euros, up 11% year on year. Among them, the core Jewelry division recorded 24% growth at constant exchange rates in Q1 of fiscal 2027, achieving double-digit high growth for seven consecutive quarters and becoming the core pillar of the group's performance; the Specialized Watchmaking division grew by 8% in the same period.

Kanjian Finance believes that judging from the latest earnings reports of the world's top four luxury giants, the current industry growth logic has been completely reshaped. In the short term, the pattern of market divergence will continue to evolve, and hard luxury categories such as jewelry and high-end watchmaking have prominent advantages in resisting risks and fluctuations, while fashion and leather goods categories are more affected by the consumption cycle and see more significant performance fluctuations. In the long run, leading luxury groups boast solid competitive advantages with their unique brand scarcity and deep moats. If the global consumer market, especially consumer demand in Asia, continues to recover in the subsequent period, the performance of leading luxury enterprises is expected to return to the growth track.