When athletes started to return their 2024 medals after they began to corrode, it was an omen of things to come.
The medals were designed by French jeweler Chaumet, which is owned by luxury-goods giant LVMH.
Though the French mint produced the medals, the bad publicity fell on LVMH after it made a spectacle of its corporate sponsorship of the games.
A luxury pioneer in downturns, too?
Paris-based LVMH is not corroding, but it is not doing great either.
In late 2022, the company’s market value soared high enough to make , its founder and chairman, who controls about half of the company’s shares, the richest man in the world. Since then, its stock price has seen a notable drop.
The conglomerate, which owns 75 brands like , Dior and jewelers Bulgari and Tiffany & Co., is suffering from slowing sales after a post-COVID boom.
Half-year results released on July 24 show that revenue was down 4% compared with the same six-month period in 2024. Profits from recurring operations were down by 15% and came to €9 billion ($10.5 billion).
Sectors like wine, spirits, fashion and leather goods saw revenue and operating profits decline in the first half of the year. While its watches, jewelry, perfumes and cosmetics businesses remained stable.
LVMH said the company “showed good resilience and maintained its powerful innovative momentum despite a disrupted geopolitical and economic environment.” Demand in Europe was “solid” and “remained stable” in the US.
Rising prices and more overstock
It is not just LVMH that is suffering. Kering, which is also based in Paris and owns , Bottega Veneta and , reported a significant decline in sales in the first half of the year.
“Luxury is in a death spiral,” predicted Katharine K. Zarrella in a December 2024 guest essay in the New York Times. “After a decade of nearly unfettered growth, the sector is bombing across the globe. Analysts point to less-affluent buyers reining in their spending and slowing demand in China.”
Zarrella, a longtime fashion editor, saw bad omens all around, like rising prices and poor quality. Beyond that, more brands are selling overstock at discount outlets. The more ubiquitous luxury becomes, the less desirable it is.
“Once-revered establishments that prided themselves on craftsmanship, service and cultivating a discerning and loyal customer base have become mass-marketing machines that are about as elegant and exclusive as the Times Square M&M’s store,” she concluded.
Painful tariffs from the US
Uncertainty over tariffs is another headache for the industry. Currently, the Trump administration has put a and a .
This could have real consequences for the important US market, since a lot of luxury goods are made in France or Italy and a lot of watches come from Switzerland.
Generally, people spend more freely on personal luxury goods when they are optimistic about the future. But these tariffs could go up, go down or disappear.
No one knows how trade talks will proceed, and many are likely to just wait and see.
Chinese shoppers more careful
While in China, some brands are doing fine, others are way down, says Imke Wouters, a partner at consultancy Oliver Wyman and a retail expert with 15 years of experience in China.
Looking ahead, Wouters thinks the industry will see more moderate growth than in the recent past. “It’s not like the high days when all luxury brands were doing well,” she told DW. There will be winners and losers.
US tariffs on European luxury goods won’t impact Chinese buyers, but geopolitical uncertainty is keeping them closer to home. In the past, the Chinese bought around 40% of their luxury goods at home. Now, as they rediscover mainland China, Wouters thinks around 75% is bought within the country.
But as the Chinese economy struggles, many aspirational shoppers have fallen away, and those left may be less eager to spend on luxury goods.
To stay successful with the remaining Chinese shoppers, luxury companies have to double down on their core customers and the customer experience, says Wouters. They have to offer something unique and make sure price hikes reflect better quality.
More big spenders on the way
With many buyers holding back, the luxury goods industry could be facing its biggest setback since the 2008-2009 financial crisis, not counting the COVID shock, according to a new report by consultancy Bain & Company.
Last year, luxury sales were down 1% globally. There has been a further decline this year. The Bain analysts foresee a moderate decline of 2-5% for the industry by year’s end. They believe that its prospects will be brighter in the future.
“Rising global incomes, generational wealth transfers, and a projected 20% increase in the number of high-net-worth individuals will further expand the pool of potential luxury buyers,” Claudia D’Arpizio and Federica Levato wrote in a press statement.
But a bigger pool of shoppers is not enough, warned the pair. “Brands will need to rethink how they engage younger consumers, avoid over-reliance on top spenders, and build emotional connections that go beyond transactional loyalty.”
Edited by: Ashutosh Pandey
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