LVMH just reported €80.8 billion in revenue for 2025, down 5% from 2024. The stock fell 7-8% the day after results, dragging down the entire European luxury sector with it (Kering -3-5%, Hermès -2-4%, Prada -5%).
But here's the thing: The business is actually in better shape than the headline suggests. Operating margin contracted slightly to 22% (down from ~23% in 2024), but free cash flow grew 8% to €11.3 billion. LVMH took a revenue hit from the luxury slowdown but protected profitability and generated more cash.
So why did the stock fall? Because Richemont and Burberry had already beaten expectations, raising the bar. LVMH's results were "fine" but not good enough to match peers. That's the context the market cares about.
The Numbers
- Revenue: €80.8 billion (-5% reported, -1% organic)
- Operating profit: €17.8 billion (-9%)
- Operating margin: 22% (down ~100 basis points from 23% in 2024)
- Net profit: €10.9 billion (-13%)
- Free cash flow: €11.3 billion (+8%)
- Net financial debt: €6.9 billion (-26%)
The revenue decline looks bad until you break it down:
- -3% from currency (strong euro hurt conversions)
- -1% organic decline (actual business slowdown)
So the real drop was just 1% in constant currency terms. Not great, but not a collapse.
Fashion & Leather Goods: Still Absurdly Profitable
This is Louis Vuitton, Dior, Fendi, Celine—the handbag and luxury fashion brands that print money.
- Revenue: €37.8 billion (-8% reported, -5% organic)
- Operating profit: €13.2 billion (-13%)
- Operating margin: 35%
Let that sink in: Even in a slowdown, LVMH's fashion division makes 35 cents of operating profit on every euro of sales. That's insane. Most retailers are happy with 10%.
The slowdown hit hard (revenue down 5% organically), but the margin stayed sky-high because LVMH cut costs and protected pricing. They didn't discount to chase volume.
Sephora Keeps Growing
While luxury fashion slowed, Selective Retailing (mostly Sephora) grew 4% organically.
- Revenue: €18.3 billion (flat reported, +4% organic)
Why? Beauty is more resilient than $5,000 handbags. When people tighten budgets, they still buy lipstick. They don't buy another Birkin.
Sephora is now LVMH's second-biggest division by revenue and it's still growing. Bernard Arnault (LVMH's CEO and richest man in Europe) loves this business because it's consistent.
China Came Back in the Second Half
LVMH said "the rest of Asia saw a noticeable improvement in trends with respect to 2024, with a return to growth in the second half of the year."
Translation: China started buying again after the government stimulus kicked in. That's huge because China is LVMH's biggest growth market.
The bad news: Japan was down because the yen strengthened (fewer tourists buying Louis Vuitton bags in Tokyo). Europe declined in H2 (economic weakness). US grew but not enough to offset the rest.
What About the Other Divisions?
Watches & Jewelry (Tiffany, TAG Heuer, Bulgari):
- Revenue: €10.5 billion (-1% reported, +3% organic)
- Tiffany's renovated stores are working. The brand is back.
Perfumes & Cosmetics (Dior Beauty, Givenchy, Guerlain):
- Revenue: €8.2 billion (-3% reported, flat organic)
- Holding steady despite luxury slowdown.
Wines & Spirits (Moët, Hennessy, Dom Pérignon):
- Revenue: €5.4 billion (-9% reported, -5% organic)
- Cognac demand is weak (Hennessy struggling). Champagne held up better.
The Free Cash Flow Story
Here's the most impressive number: Free cash flow grew 8% to €11.3 billion despite revenue falling 5%.
How? LVMH cut costs, managed inventory tightly, and collected cash faster. This is what separates great businesses from good ones—they generate more cash in a downturn by getting more efficient.
LVMH also paid down debt. Net financial debt fell 26% to €6.9 billion. The balance sheet is rock-solid.
What Bernard Arnault Said (And Didn't Say)
Here's the quote that mattered most: "2026 won't be simple."
That was the headline from every major outlet covering the results. Arnault is warning that the luxury slowdown isn't over yet. The full quote:
"Once again in 2025, LVMH demonstrated its solidity and effective strategy upheld by its highly engaged teams. The Group was buoyed by the loyalty and growing demand shown by our local customers."
Translation: "We're managing through this, but don't expect a quick recovery."
He also highlighted long-term investments:
- The Louis (new luxury hotel in Shanghai)
- House of Dior store openings
- Tiffany renovations in Milan and Tokyo
- World Expo in Osaka (showcasing French craftsmanship)
- Formula 1 partnership (10-year deal, first year done)
Arnault is playing the long game. He's investing in stores, experiences, and brand-building while competitors cut back.
Why the Stock Fell
LVMH's results weren't bad. But they came after Richemont reported record sales and Burberry beat expectations. The bar was raised, and LVMH didn't clear it.
The market was hoping for a stronger China recovery or better margin performance. Instead, LVMH delivered "fine" results in a tough environment. That's not enough when peers are outperforming.
The Bottom Line
LVMH's revenue fell 5% in 2025, and the stock fell 8% after results. But the business is stronger than the headlines suggest:
- Margins contracted slightly to 22% (cost discipline kept it from falling further)
- Free cash flow grew 8% (operational excellence)
- China returned to growth in H2 (stimulus working)
- Sephora keeps growing (beauty is resilient)
- Fashion & Leather Goods still at 35% margin (pricing power intact)
This is what a well-managed luxury business looks like in a slowdown. LVMH didn't panic, didn't discount, and didn't sacrifice long-term brand value for short-term sales.
But the stock fell because the market compares you to your peers, not to your own expectations. Richemont and Burberry set the bar high, and LVMH didn't match them.
The question for 2026: Will China's recovery continue? Arnault says "2026 won't be simple," which means he's not expecting a quick turnaround. If China stalls again, expect another year of flat-to-down revenue. But even then, margins and cash flow will probably hold up.