The Wall Street Journal's "Heard on the Street" column noted something rare in early October: shares of LVMH and Prada are trading at a steep discount to Zara owner Inditex and H&M. On forward earnings, LVMH trades at a 30 percent discount to Inditex — the widest gap since 2016. If Louis Vuitton and Prada suddenly priced their products 30 percent below Zara, shoppers would stampede. Investors, though, are unmoved.
Behind the discount is a broad selloff. Bloomberg reported on September 15 that LVMH fell another 2.5 percent that day, its market value dropping to €201 billion and slipping out of Europe's top 10 listed companies for the first time since 2017, overtaken by L'Oréal. LVMH is down 37 percent this year and 55 percent from its April 2023 peak of €901.10, back to pre-pandemic early-2020 levels. On September 3 it touched €427.75, a near six-year low. Hermès has fared little better: down 34 percent year to date, closing October 2 at €1,299.50, 43.5 percent below its 52-week high of €2,300. Kering has fallen nearly 19 percent in the past month.
The Wall Street Journal and the Financial Times agree on the cause: Chinese demand has stalled. Chinese consumers powered more than half of the luxury industry's growth over the past 30 years, and at its peak China accounted for roughly 30 percent of LVMH's total revenue. Now, Bernstein data shows China's retail sales growing less than 1 percent for five straight months; sales of 25 major luxury brands in China fell more than 10 percent year on year in July, with Louis Vuitton, Dior, and Gucci all posting double-digit declines. Bain estimates some 60 million middle-class "aspirational" shoppers — about 15 percent of the industry's customer base — have quit buying luxury in the past three years. Bernstein cut its third-quarter industry organic-growth forecast from 6.3 percent to 4.9 percent in September.
The other driver is self-inflicted: prices. Luxury prices have risen 50 to 70 percent since 2019, pushing price-sensitive middle-class shoppers toward jewelry or fast fashion — the Journal notes more than half of Louis Vuitton's sales come from the middle class. "Many customers are mixing in their wardrobes different types of products, from different segments of the market (with) maybe some degree of trading down from luxury," Inditex CEO Garcia Maceiras told Reuters. The numbers back him up: Inditex posted first-half sales of €19.8 billion, up 7.6 percent, with net profit of €3 billion. On October 2 its market value of €168.4 billion overtook Hermès.
The companies are acknowledging the pressure. LVMH cited weak U.S. and Chinese consumption as its main headwind on its first-quarter call; CFO Cécile Cabanis told Reuters last October that China was "stabilizing" but that "a full recovery will take time." The Financial Times reported this week that LVMH is considering selling its 50 percent stake in the Fenty Beauty joint venture with Rihanna, plus Marc Jacobs and other brands — its biggest portfolio reshuffle in nearly 40 years. Burberry CEO Joshua Schulman told The Times the company is bucking the industry trend, with its sights set on returning to the £3 billion sales peak of 2023.
The damage has reached everyone: LVMH has lost more than half its market value and Bernard Arnault has fallen out of the world's top 10 billionaires; restructuring names like Kering and Burberry have fallen harder, with Kering's P/E still above 40 — a denominator effect from collapsed earnings. The next test comes October 22, when Hermès reports third-quarter sales and investors learn whether even wealthy shoppers are pulling back. Analysts are split. JPMorgan expects the volatility and soft trends in China to continue "for the rest of the year and possibly into 2027." Morningstar's Jelena Sokolova says investors worry that "to support the valuations where they have got to since mid-2025, there would need to be a recovery. And it doesn't seem like it's imminent." Bulls cite the 2016 analogy: buying LVMH then and holding five years delivered a 34 percent annualized total return.