Year-to-date, LVMH share price has decreased by almost 20%. In mid-2025, the U.S. imposed 15% tariffs on European luxury imports, directly impacting LVMH’s flagship categories such as wines, spirits and leather goods (Reuters, 2025). These tariffs disproportionately targeted high-value discretionary goods, making LVMH one of the hardest hit among European exporters. The company’s shares fell nearly 12% over just two weeks, as analysts flagged heightened risks of margin compression and higher consumer prices in the U.S. market (FT, 2025). Some houses like Moët Hennessy and Louis Vuitton bore the brunt, given their reliance on U.S. demand, while smaller divisions struggled to absorb rising costs. For investors, the tariffs were a reminder of the fragility of global luxury supply chains and how dependent LVMH’s profitability is on cross-border flows.
The U.S. accounts for nearly 27% of LVMH’s revenue, while Asia ex-Japan contributes more than 35% (LVMH, 2025). This dual exposure makes the group especially vulnerable to geopolitical shifts. In China, a combination of slowing discretionary spending and a wave of consumer nationalism - encouraging buyers to “buy Chinese” rather than European brands- exacerbated tariff headwinds. Revenue growth turned negative in Q2 2025, a rare occurrence for a group that has long relied on China as its growth engine (Vogue Business, 2025). Meanwhile, American consumers began to shift away from premium spirits and accessories as price increases filtered through retail channels. This double blow underscored the risks of geographic concentration, with analysts questioning whether LVMH can diversify enough to reduce reliance on its two biggest markets.
Beyond tariffs, 2025 delivered reputational blows. Criticism surrounding LVMH’s high-profile Olympic sponsorship backfired when reports emerged of medals tarnishing during the Games, raising questions about quality control and branding strategy (The Times, 2025). In parallel, renewed animal welfare scandals- centred on exotic leathers and supply chain transparency- sparked global consumer backlash on social media. Shares slipped an additional 7% in early summer, as investors began pricing in the potential for sustained consumer distrust. Younger demographics, particularly Gen Z and millennial buyers, were vocal in their calls for ethical luxury, leaving LVMH facing not only immediate financial pressure but also long-term reputational risk.
Despite turbulence in core luxury divisions, LVMH’s selective retailing arm proved more resilient. Sephora posted +2% organic growth in H1 2025, benefiting from its accessible price points and strong digital ecosystem. Duty Free retail also managed slight gains as international travel picked up in Europe and the Middle East (LVMH, 2025). These results offered a partial cushion against weakness in Wines & Spirits, where tariffs weighed heavily. The performance highlighted the strategic value of diversification within the LVMH portfolio, enabling the group to offset cyclical volatility in one area with steadier growth in another.
LVMH also accelerated its localisation efforts, particularly in the U.S. The group opened its second Louis Vuitton workshop in Texas, bringing production closer to its largest non-Asian consumer market (WSJ, 2025). Beyond lowering tariff exposure, this move carried a symbolic message of long-term commitment to American jobs and markets. The workshops are expected to scale capacity over the next 18 months, creating a partial hedge against future trade frictions. This strategy also aligns with consumer preferences for “Made in America” goods, potentially reinforcing brand affinity in the U.S.
Even amid profit headwinds, LVMH’s cash generation stood out. Operating profit fell 15% YoY, but free cash flow rose 29% to €4.0bn (LVMH, 2025). This improvement was driven by tighter working capital management and inventory discipline, offering reassurance to investors about LVMH’s financial resilience. The group has maintained strong dividend commitments and preserved room for opportunistic acquisitions- key levers of its long-term growth strategy. For analysts, robust cash flow in a harsh operating climate was a signal that LVMH retains the ability to weather storms and invest for recovery.
LVMH’s unmatched brand portfolio remains its strongest defence. Flagships such as Louis Vuitton, Dior, Tiffany & Co., and Moët Hennessy give the group unmatched pricing power and global reach. This breadth enables cross-market resilience, as strength in cosmetics and retail can offset softness in fashion and wines. Moreover, brand heritage and aspirational appeal provide a buffer against short-term demand shocks, allowing LVMH to sustain premium pricing even when tariffs drive up costs.
While Q2 saw a dip in Chinese luxury demand, the longer-term fundamentals remain attractive. If Beijing loosens restrictions on luxury imports or consumer confidence stabilises, Asia could quickly rebound as a growth driver. Chinese consumers continue to view luxury goods as markers of success and status, making them highly likely to return to LVMH houses once macro pressures ease. With over one-third of revenue sourced from Asia ex-Japan, even a partial recovery could materially improve LVMH’s top line.
Beyond fashion, LVMH’s strength in selective retailing and cosmetics creates a defensive hedge against cyclical swings in discretionary luxury spending. Analysts expect these divisions to carry momentum into 2026, particularly as Sephora expands its digital channels and Duty Free leverages recovering international travel (Vogue Business, 2025). This diversification ensures that LVMH can sustain growth across cycles, differentiating it from pure-play luxury rivals more exposed to single product lines.
The most immediate overhang remains U.S. tariffs. LVMH faces a delicate balancing act. Raising prices risks alienating consumers, while absorbing costs undermines margins. With trade negotiations between Washington and Brussels unresolved, the outlook remains uncertain. A prolonged standoff could lock in higher costs, slowing both top- and bottom-line growth for years.
The scandals of 2025 inflicted reputational damage that could outlast the tariff cycle. Consumers, especially younger ones, are increasingly conscious of sustainability, ethics, and authenticity in luxury purchases. Without a credible ESG repositioning, LVMH risks erosion of long-term brand equity. Competitors who lean more aggressively into “sustainable luxury” could capture market share if LVMH fails to address consumer sentiment decisively.
Finally, broader macroeconomic headwinds are weighing on the entire luxury sector. Analysts forecast a 3-5% YoY slowdown in luxury demand across Europe, China, and the U.S. for 2025-26 (FT, 2025). Rising interest rates, slowing consumer confidence, and “luxury fatigue” among middle-tier buyers all pose risks. LVMH, while resilient, is not immune to cyclical downshifts, particularly if discretionary spending softens further.
LVMH’s YTD stock decline reflects a perfect storm of tariffs, scandals, and softening global demand. Yet its structural advantages- world-leading brands, geographic reach and diversified segments- remain intact. Rising U.S. production capacity and resilient free cash flow provide cushions against short-term shocks.
The luxury sector may be under unprecedented scrutiny, but LVMH’s scale, heritage and adaptability give it a pathway back to growth. The group’s challenge now lies in restoring consumer trust, navigating geopolitical uncertainty and reasserting its position as the global leader in luxury. If it can stitch back its brand prestige while weathering the tariff storm, LVMH is likely to emerge stronger, albeit after a period of volatility.