The stock price has halved, the core growth engine has stalled, and there are issues with succession... The luxury goods giant LVMH is facing its most severe crisis in history

When the captain of the world's largest luxury goods group complains about the background music at the shareholders' meeting, you know things have gotten really bad.

LVMH President and CEO Bernard Arnault is facing an unprecedented perfect storm: a sharp decline in global demand, escalating threats of U.S. tariffs, a stock price that has halved from its peak, and a personal fortune that has evaporated by more than $80 billion.

Even more fatal is that the 76-year-old "wolf in cashmere" has found that his meticulously crafted €85 billion luxury empire is revealing structural cracks—from the growth slowdown of core brand Dior to the ambiguity of the heir apparent plan, everything is reminding the market that LVMH's golden era may indeed be over.

Market Value Evaporated by €221 Billion: The Fall from Europe's King to the Tenth Richest

Numbers do not lie. LVMH's stock price has nearly halved since its peak in April 2023, with a market value evaporating by approximately €221 billion. The company's stock price has fallen over 30% this year.

This once top three European company is no longer in the top three, and the crown of France's most valuable company has been taken by its rival Hermès—ironically, this is the company Arnault once tried to secretly acquire but failed.

Arnault's personal wealth has plummeted from a peak of $231 billion in March 2024 to about $149 billion, dropping from the world's richest person to the tenth position. This classical pianist, who once looked down on all billionaires outside North America, now seems far from an Olympian deity.

Pierre-Olivier Essig, head of research at AIR Capital, pointed out mercilessly:

"In the 20 years we have covered LVMH, we have never seen so many red flags. The global financial crisis and the pandemic were significant challenges, but LVMH's scale today is much larger, and the recent value destruction is unprecedented. This is clearly the biggest crisis in LVMH's history."

And the key U.S. market is facing Trump's erratic tariff threats. Although Arnault boasts of his decades-long friendship with Trump—having known each other since Arnault briefly ventured into the U.S. real estate market in the 1980s—this "friendship" has not brought substantial help. In May of this year, the Arnault father and son were invited to the White House, where Trump referred to them as "my good friends," but just weeks later, the president threatened to impose a 50% tariff on EU goods.

The "Grocery Store" Curse Left by Acquisition Addiction

Arnault's most famous nickname in the business world, "wolf in cashmere," is well-deserved, as his ruthless acquisition strategy has led LVMH to amass a vast and complex portfolio of over 75 brands. From the cash cow Louis Vuitton to the spirits division Moët Hennessy, from cosmetics retailer Sephora to the luxury hotel chain Cheval Blanc, and even including the Parisian bistro L'Ami Louis that offers $100 roast chicken This diversification is often overlooked during prosperous times but becomes a burden during difficult periods. The forward price-to-earnings ratio of the single brand Hermès is about 50 times, while LVMH is only about 20 times. Ariane Hayate, a fund manager at Edmond de Rothschild Asset Management, bluntly stated:

"As long as LVMH grows significantly, investors won't care much about the group structure, but when the situation becomes tough, investors will quickly punish them with a group discount."

LVMH has sold underperforming brands such as Off-White and Stella McCartney and is considering divesting more assets. According to insiders, the group has explored the potential spin-off of Sephora and even considered an IPO in Amsterdam in 2021.

Core Brand Crisis: Dior Stalls, Moët Hennessy Layoffs

The most concerning issue is the predicament of the two core businesses, which has also put Arnault's two children in an awkward position.

Delphine, the 50-year-old eldest daughter, took over Dior in 2023, but this brand, which accounts for 14% of the group's profits, has lost momentum under her leadership. After years of double-digit growth, Dior has underperformed compared to Louis Vuitton in recent quarters. Analysts attribute this to unreasonable product price increases, and the brand has also faced criticism due to a scandal involving the exploitation of undocumented workers by Italian subcontractors.

Dior is crucial to LVMH. According to HSBC, Dior accounts for 14% of the group's profits, second only to Louis Vuitton, which accounts for 55% of the group's profits. To revive growth, LVMH has just appointed Jonathan Anderson as the new creative director for the brand, responsible for women's wear, haute couture, and men's wear.

The wine and spirits division Moët Hennessy is similarly troubled, caught in an inflation spiral in the U.S., with cognac losing out to competitors and cheaper tequila and bourbon. In February, the CEO was replaced by former CFO Jean-Jacques Guiony, and 33-year-old Alexandre also joined the management team. However, this new partnership has had a difficult start, announcing layoffs of 1,200 people, accounting for 13% of the total workforce, just before Labor Day in France.

Heir Apparent Uncertainty: The Throne Struggle Among Five Children

76-year-old Arnault shows no signs of relinquishing power, as this year's shareholder meeting extended the CEO age limit from 80 to 85. Unlike other family businesses, Arnault has successfully involved all five of his children—Delphine, Antoine, Alexandre, Frédéric, and Jean—in the business while masking the differences among the siblings.

However, investors are increasingly concerned about succession issues, even leading to a "governance discount." Flavio Cereda, luxury portfolio manager at GAM UK Ltd, observed:

"Governance is in flux, with many descendants. He is pitting one against another." Last year, Arnault chose Stéphane Bianchi as his deputy. The 60-year-old former Andersen consultant has spent most of his career managing small family-controlled cosmetics and fashion companies, focusing on guiding heirs. Although Bianchi stated at the shareholders' meeting that LVMH has a mid-term succession plan and a "contingency" plan, the lack of a clear heir makes investors uneasy.

As Arnault stated in a debate at the University of Oxford in 2016:

"A company, even if successful, should be run as if it could go bankrupt in 12 months."

Today, this statement sounds more like a prophecy of the current crisis rather than management wisdom