In a dramatic shift within the luxury fashion industry, LVMH Moët Hennessy Louis Vuitton, once the undisputed leader, has been dethroned by Hermès as the world’s most valuable luxury firm. This change comes on the heels of a disappointing sales report from LVMH, which revealed a three percent drop in revenue for the first quarter of 2025 compared to the same period last year. Analysts had anticipated a modest two percent increase, making the results particularly jarring for investors.
On April 15, 2025, LVMH shares plummeted by eight percent, erasing approximately $23 billion from its market value. Following this decline, LVMH's market capitalization stood at €244.39 billion (approximately $277.42 billion), while Hermès, with its shares closing 0.2% higher, reached a market value of €248.62 billion. This marks a significant moment in the luxury sector, as Hermès, known for its iconic Birkin bags, has now taken the top spot.
Bernard Arnault, the head of LVMH and France’s richest man, addressed shareholders at the company’s annual general meeting held at the Louvre Museum in Paris on April 17, 2025. He attributed the company’s struggles to adverse U.S. trade policies, stating, “Until the end of February, everything was going very well. Then we came up against a global economic geopolitical situation that was turned upside down by potential customs duties.”
The luxury giant has faced a challenging environment, particularly with a significant decline in demand from Chinese consumers and a downturn in its U.S. market, affecting divisions such as Sephora and wine and spirits. As a result, LVMH’s stock has seen a staggering 23 percent decline this year, making it one of the worst performers on the Paris CAC40 index.
Arnault emphasized the need for European leaders to resolve the ongoing trade tensions with the U.S. amicably, warning that failure to do so would force LVMH to increase production in the U.S. and potentially “avoid Europe.” He suggested that European politicians should advocate for a free-trade zone between Europe and the United States, echoing sentiments from other industry leaders.
In contrast, Hermès has opted to pass on the costs of tariffs directly to its affluent American clientele, a strategy that could bolster its market position. Starting May 1, 2025, Hermès will fully shift the tariff costs for all its goods, including its high-end handbags and scarves, to its customers, a move that could further enhance its profitability.
Meanwhile, LVMH is taking a more cautious approach. Arnault noted that the company has set aside a €10.5 billion cash cushion to weather the economic storm and is considering increasing production at its existing U.S. factories. The company has three Louis Vuitton factories in the United States, including one opened in 2017 in Texas, in a ceremony attended by then-President Donald Trump.
Despite the challenges, Arnault remains optimistic about LVMH’s long-term prospects. He stated, “Maybe we’ll see a little less growth in the short term, but that doesn’t bother me at all.” He emphasized the importance of maintaining the luxury brand’s integrity and quality, stating, “the goal is to offer the best quality.”
In addition to these developments, Oakmark Funds recently released its first-quarter 2025 investor letter for the Oakmark International Fund, which reported a 7.88% return for its Investor Share Class, outperforming the MSCI World ex USA Index’s 6.20% return. The fund has returned 8.37% since its inception, compared to the index’s 6.07%.
The Oakmark letter highlighted LVMH as a key stock, despite its recent struggles. The fund noted that LVMH is the world’s largest luxury goods company, boasting a portfolio of 75 brands, including Louis Vuitton and Christian Dior. The letter stated, “We view this as a rare opportunity to purchase shares in LVMH at a discounted valuation to its peers and the company's own trading history.”
However, LVMH’s one-month return was reported at -18.44%, and its shares have lost 36.20% of their value over the past year. As of April 16, 2025, LVMH shares closed at $108.93, with a market capitalization of $276.31 billion.
In the face of these challenges, LVMH’s leadership remains focused on adapting to the evolving market landscape. Arnault’s comments reflect a commitment to navigating the complexities of international trade while maintaining the brand's reputation for luxury and quality.
As the luxury sector continues to evolve, the competition between LVMH and Hermès will likely intensify, shaping the future of high-end fashion. With shifting consumer preferences and economic uncertainties, how these companies respond will be crucial in determining their market positions moving forward.
