The combined market value of the six major luxury conglomerates has evaporated by nearly 2 trillion yuan.

Luxury companies are undergoing a round of value revaluation.

According to a report by the Financial Times of the UK on the 25th, the combined market value of Europe's six largest listed luxury companies by market cap has evaporated by 251 billion euros (equivalent to about 1.87 trillion yuan) so far this year, including Richemont, Prada and Moncler. The two luxury groups with the largest declines are LVMH and Hermès, whose market values have shrunk by 131.6 billion euros (equivalent to about 984.881 billion yuan) and 93.3 billion euros (equivalent to about 698.248 billion yuan) respectively.

Valuations Fall to Decade-Low Levels

Recently, major luxury giants have successively released their third-quarter performance reports. LVMH Group's total revenue in the first three quarters reached 57.148 billion euros, down 2% year on year; its fashion and leather goods segment sales fell 5% in the third quarter of this year.

The latest financial report released by Kering shows that the group's revenue in the third quarter of 2026 was 3.345 billion euros, down 1% year on year on a comparable basis; revenue of its core brand Gucci was 1.291 billion euros, down 6% on a comparable basis.

Hermès' third-quarter sales reached 4.1 billion euros, roughly flat with the second quarter; up 4% year on year at fixed exchange rates and 6% year on year at current exchange rates. Among them, revenue from the ready-to-wear and accessories segment fell 1.4% year on year, and fell 2% year on year at fixed exchange rates.

Reuters reported that Hermès' third-quarter revenue was below analysts' expected 5.2% growth rate, calling it "the weakest quarterly sales growth rate since the beginning of 2020".

While performance is weakening, the share prices of listed luxury companies have also been falling all the way.

According to a Bloomberg report on the 23rd, the stock valuations of leading European luxury enterprises have hit the lowest level in more than ten years. At present, Hermès' forward price-to-earnings ratio is about 27 times, which was close to 70 times at the post-pandemic peak. LVMH's current forward P/E ratio is about 16 times, the lowest level in more than a decade. The share prices of both companies have fallen by about 40% this year, and the much-anticipated recovery of the luxury industry has not materialized.

The sharp drop in LVMH's share price has also greatly reduced the wealth of its leader Bernard Arnault. In 2024, Bernard Arnault topped the Forbes billionaire list with a net worth of as high as 233 billion US dollars (equivalent to about 1.56 trillion yuan). As of October 26, his wealth stands at 116.6 billion US dollars (equivalent to about 778.661 billion yuan), ranking 17th on the Forbes billionaire list.

Screenshot of Bernard Arnault, source: official website of Forbes

Last Thursday, after Kering released its financial report, market concerns further intensified: Gucci's sales fell short of expectations, and the progress of its transformation also failed to meet expectations. The stock fell as much as 12% during trading on Friday (local time, October 23), marking the largest single-day drop since April 2025.

The team of analyst Nick Anderson at the German investment bank Berenberg downgraded Hermès' rating from "Buy" to "Hold", citing reasons including that the proportion of its business targeting light luxury consumer groups is higher than previous market expectations.

Maria Mehta, an analyst at US investment research firm Bernstein, said: "The current valuation reflects both the weak performance of enterprises and the weakening macro environment. LVMH is a highly macro-sensitive asset, and its performance recovery depends on the return to growth of the Chinese market; while investors of Hermès no longer believe that its business has counter-cyclical resilience." Hermès used to be regarded as a safe-haven asset in a volatile market, with the core logic that popular products have long waiting lists and are in short supply.

Is the Price Hike Strategy No Longer Working?

In the past few years, frequent price hikes by luxury brands have led some consumers to regard them as "wealth management products". But now, this strategy may no longer work.

A report by Singapore's Lianhe Zaobao on the 25th pointed out that the key to this downturn lies in the fact that the long-standing growth model of luxury brands is being challenged. Years of price increases, emphasis on scarcity, and reliance on brand history and status symbols to support high premiums used to be effective strategies in this industry. But today, as prices keep rising, consumers may not feel corresponding improvements in quality, design or experience, and brands may turn their own advantages into burdens.

"Luxury goods certainly cannot be priced purely according to material costs. Their design creativity, exquisite craftsmanship, brand and services all have value. The problem is that brands cannot just emphasize how long their history is and how rare their products are, and assume that consumers will always accept higher prices." the above report said.

According to a recent Reuters report, several resellers said that Hermès Birkin bags have become more easily available in the second-hand market, thus losing some of their appeal, indicating that Hermès' scarcity-driven business model may be under pressure.

Erwan Rambourg, head of European luxury and lifestyle at Goldman Sachs Research, pointed out in a recently released research report that traditional premium brands have seen price increases of about 60% between mid-2019 and mid-2026. "Due to price hikes and the less attractive value proposition of many brands, many target consumers seem to have decided to give up buying luxury goods," the report said. Along with the sharp rise in prices, the lack of innovation in the post-pandemic luxury industry has led to a decline in consumer interest, and store foot traffic has also decreased accordingly.

Judging from the recently released financial reports, some luxury groups have adopted a contraction strategy on the channel side. Kering's third-quarter report shows that after net closing 75 stores in 2025, the group closed a net 105 stores in the first 9 months of this year (128 closed, 23 newly opened), exceeding its full-year target of 100 net store closures ahead of schedule. The group currently plans to close at least 125 net stores throughout 2026.

However, the aforementioned Goldman Sachs research report believes that luxury goods manufacturers are expected to usher in faster revenue growth after several years of sluggish sales. The agency forecasts that the revenue growth rate of luxury companies will reach 7% in 2027, higher than the 6% in 2026.

The above research report said that in the past three to four years, the share prices of luxury goods manufacturers have fallen, and earnings expectations have also declined. Therefore, the current valuation is not particularly attractive, but it does not appear to be overvalued. "But we believe that valuation alone can rarely be a catalyst for investors to buy or sell stocks in this sector," the report said. "On the contrary, sales momentum is more important, and we expect sales momentum to pick up soon."

Chinese Luxury Brands Are on the Rise

A recent article by the Financial Times said that European luxury groups such as Kering, Hermès and LVMH previously attributed their poor performance to weak sales in China. But at the same time, Chinese luxury brands have still successfully expanded their sales and market share. For example, local Chinese handbag companies tracked by Bernstein have recorded an average annual sales growth of about 51% on China's leading e-commerce platforms since 2021.

This shift is not limited to handbags. Chinese jewelry brand Laopu Gold has built a fast-growing business with its unique design and high-end pricing. Last year, its sales more than tripled, and in the first half of this year, it grew by 61% again. Laopu Gold, known as "the Hermès in the gold sector", has maintained a gross profit margin of over 40%.

The aforementioned report from Lianhe Zaobao also pointed out that Chinese consumers, especially Gen Z and millennials, are re-examining their consumption behaviors. They no longer simply rely on Western brands to demonstrate their status, but turn to high-quality local high-end brands. This shift in consumption patterns stems from the rise of the national trend of domestic brands, pragmatic economic considerations, and the pursuit of cultural authenticity. Some local Chinese brands have achieved impressive growth with craftsmanship comparable to that of Western luxury giants and more favorable prices.

The aforementioned Financial Times report said that the fate of European automakers such as BMW and Volkswagen has sounded the alarm for luxury giants. Luxury giants have always regarded China as the most potential market. After Volvo released its China sales figures last Friday, its share price once fell by 30%. LVMH, Kering and their peers should keep in mind the dismal trajectory of automakers when responding to this new trend.

This article is from the WeChat official account "China News Finance" (ID: jwview), written by Luo Kun, and authorized for release by 36Kr.