LVMH

IThe business

LVMH sells leather goods, fashion, jewelry, perfume, champagne and cognac, and runs the retail that carries them. It describes itself as the world’s leading luxury goods group, with 75 Maisons in six sectors, 6,217 stores at 30 June 2026 and 213,932 employees at the end of 2025.⁵⁶¹⁰ In the twelve months to June 2026 revenue was €79.6BC (calculated) and profit from recurring operations was €17.4BC (calculated), a margin of 21.9%. That profit line is operating profit before impairments and disposal results; IFRS operating profit was €16.8B.⁴⁶

Profit is profit from recurring operations, calculated as FY2025 plus H1 2026 less H1 2025. Group revenue includes sales to other LVMH groups, and the last two rows hold the eliminations. Organic growth is at constant scope and currency, from LVMH’s third-quarter presentation.C (calculated)⁴⁶⁹

Fashion and Leather Goods made 74% of the Group’s profit in 2025 on 47% of its revenue, and 73% on 46% in the twelve months to June 2026.C (calculated)

How the money is made

Fashion and Leather Goods is the engine: Louis Vuitton, Christian Dior Couture, Celine, Loro Piana, Loewe, Fendi, Givenchy, Berluti and Rimowa, among others.⁵ Retail is 95% of Fashion and Leather Goods revenue, and LVMH runs about 2,300 stores for these brands.⁵ Louis Vuitton makes most of its leather goods in 29 workshops it runs.⁵ LVMH reports no revenue or profit for any maison, so the group is the smallest unit anyone outside the company can measure.

Selective Retailing is Sephora, Le Bon Marché and DFS, a travel retailer that LVMH is selling. It earns 9.9% on 22.8% of revenue.C (calculated)⁴⁶

Watches and Jewelry holds Tiffany, Bvlgari, TAG Heuer and Hublot; its revenue went from €3.4B in 2020 to €9.0B in 2021 when Tiffany joined.¹²⁵

Perfumes and Cosmetics sells Dior, Guerlain, Givenchy and Kenzo and owns Fenty Beauty; its margin has not been above 11.1% in ten years.C (calculated)⁵¹²¹³

Wines and Spirits is Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, Hennessy and Château d’Yquem. Diageo owns 34% of Moët Hennessy, the holding company for these businesses, and can put that stake to LVMH at 80% of fair value on six months’ notice.⁵⁶

Fashion and Leather Goods earned €3.9B in 2016, €16.8B in 2023 and €12.8B in the twelve months to June 2026, 24% below the peak on revenue 13% lower, and its margin is 34.7%.C (calculated)¹⁴¹¹⁴⁶ Everything outside Fashion and Leather Goods, holding costs included, fell 22% over the same period, from €6.0B to €4.7B, so the slide is broad.C (calculated)¹¹⁴⁶

Where the customers are

In 2025 the United States was 26% of Group revenue, Asia excluding Japan 26%, Europe outside France 18%, France 8%, Japan 8% and other markets 14%. In the first half of 2026 Asia excluding Japan was 29%, and 27% over nine months.⁵⁶⁹ Fashion and Leather Goods is more exposed than the Group: Asia excluding Japan was 35% of its 2025 revenue (39% in 2023), Europe outside France 19%, the United States 18%, Japan 11%, other markets 10% and France 7%.⁵ Asia excluding Japan holds China, Korea, Hong Kong, Macau, Taiwan and Southeast Asia, and its store count fell from 2,019 at the end of 2024 to 1,832 at 30 June 2026.⁵⁶ By invoicing currency, 29% of 2025 revenue was in US dollars, 21% in euros, 8% in yen and 3% in Hong Kong dollars.⁵

Organic growth was −3% and −4% in the first two quarters of 2025, +1% in the third and fourth, and +1%, +3% and +1% in the three quarters of 2026, and the quarters differ by region.¹⁰⁹ Asia excluding Japan went from −11% in Q1 2025 to +7% in Q1 2026 and −5% in Q3 2026. LVMH said the third quarter reflected a “less buoyant environment in China”.⁹⁸ The United States grew 4% over nine months of 2026 and Japan 5%, after Japan fell 14% over the same months of 2025.⁹ Currency cut 3 points from 2025 revenue and 5 points from the first half of 2026, which took €1,065M and €686M from profit from recurring operations.⁵⁶

Revenue grew from €37.6B in 2016 to €80.8B in 2025, 8.9% a year, and a good part of that was bought. LVMH paid €6B for Christian Dior Couture in 2017 and USD 16.1B for Tiffany in 2021, and consolidated Tiffany’s revenue from January 2021.¹⁴¹² Revenue fell in three of the ten years: 2020 (−16.8%), 2024 (−1.7%) and 2025 (−4.6%), and organic growth was −1% in 2025.C (calculated)⁴⁵¹³¹⁰

IIThe moat

I think LVMH has a brand moat, backed by control of its own distribution. Louis Vuitton and Dior are old and desired, and LVMH sells them mostly through its own retail, so it sets the price and keeps the retail margin. The moat is wide in Fashion and Leather Goods and thinner in the other four groups. Fashion and Leather Goods earned €12.8B in the twelve months to June 2026, 24% under 2023, on a 34.7% margin, and Wines and Spirits and Watches and Jewelry have lost 12 and 5 margin points since 2023. I call the moat narrowing.C (calculated)⁴⁶¹¹

What the moat earns

The test of a moat is the return on the capital it needs. In the twelve months to June 2026 LVMH earned 27.5% after tax on the €42.5B of capital in its operations, which is what is left of equity, the Diageo put and net financial debt after brands and goodwill, and after deducting the interest on its leases. Count the €41.9B of brands and goodwill on the balance sheet and the return is 13.8%.C (calculated)⁴⁶¹¹

Both LVMH rows clear my 8.5% cost of capital. The fall from 47.2% to 27.5% in two and a half years is the profit decline: after-tax profit less lease interest fell 31% on capital that rose 19%.C (calculated)⁴⁶¹¹ The second row is what the acquisitions cost. Tiffany sits inside it: Watches and Jewelry earned a 14.4% margin in 2025 against 18.7% in 2021.⁴¹²

The same recipe applied to Hermès gives about 75% on the capital in its operations, because Hermès holds €12.9B of net cash and almost no acquired brands. LVMH’s return is just over a third of Hermès’s, so the moat is real and the narrower of the two. Hermès’s figure uses its first-half tax rate and has no lease-interest deduction; Richemont’s filing in this file has no balance sheet, so I show no return for it.C (calculated)²⁷

LVMH earns 27% on the capital in its operations and 14% on all of it, against about 75% for Hermès on the same recipe, and both LVMH figures clear an 8.5% cost of capital.C (calculated)

Where the moat comes from

Sources: the 2025 URD, the H1 2026 report, the FY2025 financial statements and the Bain-Altagamma study.⁵⁶⁴³¹

Louis Vuitton distributes its products exclusively through its own stores.

LVMH keeps the retail margin on 95% of Fashion and Leather Goods revenue, which the URD names as the purpose of controlling distribution, and it decides where each product is sold.⁵ Wines and Spirits sells through Moët Hennessy’s distribution network, and 21% of champagne and cognac sales go through joint ventures with Diageo.⁵ The aged stock is a second barrier: champagne needs about two years in the cellar and cognac is blended across vintages, so a new entrant cannot shortcut the time.⁵

Widening or narrowing

At the core it is holding. Gross margin stayed between 64.5% and 68.8% in every year from 2016 to 2025, 2020 included.C (calculated)^1413124 Fashion and Leather Goods took 73% to 78% of Group profit in each year from 2021 to the TTM.C (calculated)⁴⁶¹¹¹² Its margin fell from 39.9% in 2023 to 34.7%, and LVMH does not say how much of that is price, volume, mix, cost or currency. Currency alone took €1,065M from Group profit in 2025.⁵

At the edges it is narrowing.

• Wines and Spirits. The margin went from 31.9% in 2023 to 19.0% in 2025 and 20.0% in the TTM. Hennessy’s volumes fell 24.2% in 2025 against 15.2% for the cognac region, and its share of regional volume fell 5.7 points, from 54% to 48%. LVMH’s champagne houses shipped 59M bottles, 22.1% of the region, down from 22.9% in 2023.⁵⁴⁴ The accounts carry the purchase commitments for minority shares, mainly the put Diageo holds at 80% of Moët Hennessy’s fair value, at €6.3B at the end of 2025 against €11.9B at the end of 2023.⁴⁵
• Watches and Jewelry. The margin went from 19.8% in 2023 to 14.4% in 2025 after the Tiffany integration and a weak watch market.⁵¹²
• Perfumes and Cosmetics. The margin was 8.9% in 2025 and has not been above 11.1% in ten years, against 35.0% for Fashion and Leather Goods.C (calculated)^1413124

Prices are also a risk. Bain and Altagamma estimate that like-for-like prices of iconic bags rose 50% to 70% between 2019 and 2025, and describe a consumer view that “the price-to-value equation has broken”.³¹ They estimate that active luxury clients fell by about 20 million in 2025, to about 330 million, from 400 million in 2022, and attribute the loss mainly to aspirational consumers.³¹ LVMH’s gross margin held at 66.4% over the same years, and LVMH publishes no price and volume split, so I cannot say how much of that came from price.

Creative leadership changed in five houses. Dior, Loewe, Givenchy, Celine and Fendi showed first collections from new creative leaders in 2025 and 2026, and LVMH calls each a renewal.⁹⁴⁴ LVMH’s third-quarter presentation reports good growth at Dior over nine months, an acceleration at Celine and a good ready-to-wear performance at Givenchy.⁹

IIIThe competitive advantage

LVMH’s advantage over its rivals is diversification. In leather and fashion it is behind Hermès on both growth and margin.

The reading across, in numbers:C (calculated)

• Against Hermès. Fashion and Leather Goods had €18.1B of revenue in the first half of 2026, 2.2 times Hermès’s whole-company revenue of €8.2B in the same half. Its margin was 34.1% against Hermès’s 41.0%, a gap of 6.9 points that was 6.7 a year earlier. Hermès’s leather goods grew 9.8% at constant rates and LVMH’s Fashion and Leather Goods fell 1% organically, about 11 points apart; LVMH reports organic growth to the whole percent and Hermès constant-currency growth.⁶⁷²⁷
• Against Kering. LVMH’s fashion and leather business is 2.5 times Kering’s whole revenue of €7.2B and earned 34.1% against Kering’s group margin of 12.8%, 21 points more. Kering grew 1% comparable in the first half, with Gucci down 5%, and LVMH as a whole grew 2% organically. Kering has closed 105 net stores in nine months.⁶²⁸²⁹
• Against Richemont. Richemont’s jewellery maisons grew 24% at constant rates in April to June 2026, while LVMH’s Watches and Jewelry grew 9% in the first half and 8% over nine months. The periods differ, so this is a direction.⁶⁹³⁰
• Against Prada and Moncler. Prada Group grew 5% organically in the first half at a 17.4% adjusted EBIT margin and Moncler 9% at constant rates at 19.0%. LVMH grew 2% at 22.5%.⁴²⁴³⁷

Unit economics

LVMH publishes no figures per maison or per store. The one unit I can build is revenue per store: Fashion and Leather Goods’ €37.8B in 2025 over about 2,300 stores is about €16M a store, an average that includes online and wholesale sales.C (calculated)⁵

Where LVMH wins

LVMH earns profit in five groups across leather, fashion, jewelry, perfume, wine and spirits and retail, so one group’s bad year does not set the Group’s result. That showed in the first nine months of 2026, when Watches and Jewelry grew 8%, Selective Retailing 6% and Wines and Spirits 5% while Fashion and Leather Goods fell 2%.⁹ The cost is a Group margin of 22.5% in the first half: Fashion and Leather Goods earned 34.1% and the other groups 10.6% to 22.4%.C (calculated)⁶⁷ The diversification has a limit, since Fashion and Leather Goods is 74% of profit and 35% of its revenue is in Asia excluding Japan.⁵

Marketing and selling expense was €29.9B in 2025, 37.0% of revenue, and LVMH opened flagship stores in 2025 and 2026 for The Louis in Shanghai, LV The Place in Seoul and Dior in New York, Los Angeles, Beijing, Osaka and Milan.⁵⁹ The company is financed at AA-, with net financial debt of €8.2B against operating free cash flow of €11.4B.C (calculated)⁵⁶

Where it loses

Hermès’s leather goods grew faster than LVMH’s, and Richemont’s jewellery maisons grew faster than Watches and Jewelry in the periods compared. In cognac Hennessy lost 5.7 points of regional share in a year.⁵²⁷³⁰ In Asia, LVMH has closed 187 net stores since the end of 2024 while the United States gained 44, a network sized for demand that did not stay.C (calculated)⁵⁶

LVMH’s fashion and leather business is 2.2 times the size of Hermès and earns a margin 6.9 points lower, and in the first half of 2026 it grew about 11 points slower than Hermès’s leather goods.C (calculated)

IVManagement

LVMH is led by Bernard Arnault, who is 77, has been Chairman since January 1989 and is also Chief Executive Officer. He joined the board on 26 September 1988, and the board renewed him as Chairman and Chief Executive Officer in 2025 and decided not to split the roles.⁵ Stéphane Bianchi is listed as Group Managing Director and chairs the Executive Committee, Cécile Cabanis has been chief financial officer since 1 February 2025, and Pietro Beccari, who ran Louis Vuitton from February 2023, became head of the Fashion Group on 1 January 2026.^5202122

Four of Arnault’s children hold operating roles and board seats: Delphine runs Christian Dior Couture, Antoine is in charge of image and environment and is CEO of Christian Dior SE, Alexandre is deputy CEO of Moët Hennessy and Frédéric is CEO of Loro Piana.⁵ All four sit on the board of 16, which is 14 members plus two directors representing employees. Nine of the 14, 64%, are independent on the company’s criteria and seven, 50%, on the AFEP/MEDEF Code’s.⁵ Henri de Castries is Lead Director.⁵

The record

Over the ten years from 2016 to 2025, revenue grew 8.9% a year, profit from recurring operations 10.8%, diluted EPS 12.0% and the dividend 14.0%. Operating free cash flow grew 11.0% a year from 2018 to 2025 and the diluted share count fell 1.3%.C (calculated)^141312411 LVMH spent €18.1B net on acquisitions from 2019 to 2025, mostly Tiffany, which bought part of that growth.C (calculated)¹³¹²⁴ Profit from recurring operations fell in 2020, 2024 and 2025.

LVMH gives no numeric guidance, so there is no record of beats and misses to grade. The outlook language was the same in January, July and October 2026: the Group “remains confident”. LVMH has paid a dividend of €13.00 for each of 2023, 2024 and 2025.⁷⁸¹⁰

Where the cash went

In the ten years to 2025 LVMH generated €80.0B of operating free cash flow. It paid €40.8B in dividends to its own shareholders (51% of the cash), spent €24.1B net on acquisitions (30%) and €6.5B net on its own shares (8%): 89% in all.C (calculated)^141312114 Another €5.7B went to minority shareholders of subsidiaries in dividends, €2.6B on their shares and €1.5B on financial investments, and a €1.4B residual covers tax on dividends, exchange rates and non-cash changes in debt. Uses came to 103% of the cash, and net financial debt rose €2.6B, from €4.2B at the end of 2015 to €6.9B at the end of 2025.C (calculated)^141312114

• Christian Dior Couture, €6B in 2017. LVMH bought it from Christian Dior SE, a company the Arnault family controls and which held 42.2% of LVMH’s capital at 31 December 2025, so the controlling holder was also the seller. Delphine Arnault has run it since February 2023.¹⁴⁵
• Tiffany, USD 16.1B in January 2021. Watches and Jewelry revenue went from €3.4B to €9.0B on consolidation and was €10.5B in 2025. Profit went from €1,679M in 2021 to €1,514M in 2025 and the margin from 18.7% to 14.4%. LVMH calls the integration successful.C (calculated)¹²⁴⁵
• DFS. Impaired in 2025 and sold in 2026: Greater China closed in March and most of the rest by the third quarter. LVMH booked an estimated loss of about €0.5B; the price is not disclosed. It sold Marc Jacobs to WHP Global on 1 September.⁵⁸²³²⁴
• Buybacks. In the first half of 2026 LVMH bought 3.63M shares for €1.8B, an average of €495, which is 29% above the €383.85 close.C (calculated)⁶ The February 2025 mandate was up to €1B; the November 2025 mandate release could not be retrieved.²⁵

The pattern is a company that pays out half its cash and spends 30% on a few large purchases, and whose dividend per share went from €4.00 to €13.00 in nine years. The dividend was cut from a planned €6.80 to €4.80 for 2019, the pandemic year, and has been €13.00 for three years.¹³⁴

Pay and ownership

Arnault is the only senior executive officer. His 2025 pay was €7.94M: €1.14M fixed, €2.20M variable, €4.48M in performance shares and €0.12M in fees and benefits. That is 0.07% of net profit.C (calculated)¹⁸⁵ At his own request the variable pay is capped at the prior year’s amount, although the committee found all criteria met. Half the variable criteria are financial and half strategic. The 7,675 performance shares vest in October 2028 if any one of profit from recurring operations, operating free cash flow or operating margin improves in 2026 and 2027 for 85% of the award, and on a sustainability test for 15%.⁵¹⁸

The hurdle is low: one of three measures has to rise. His pay is 0.07% of net profit, and the family’s 50.2% of the shares is the larger stake in the result.⁵⁶

Pay is not what moves him, since he capped his own bonus. Ownership is. The family group holds 248.9M shares, about €95.5B at the close, and he holds 946,055 himself, about €363MC (calculated).⁵⁶¹ Over ten years 51% of operating cash went to dividends and 30% to deals.^1413124 In the first half of 2026 LVMH bought back shares at an average €495, 29% above today’s close.⁶

Agache SCA, the family holding company, billed LVMH €1.58M in 2025 for assistance.⁵ The family’s market purchases of 2026 are set out in The case for the price.

Control and succession

The Arnault family holds 50.21% of the capital and 66.39% of the votes at 30 June 2026, up from 48.60% and 64.33% at the end of 2023. Part of the rise is arithmetic, since LVMH retires the shares it buys.⁶⁵ Any ordinary resolution passes with the family’s votes, and no outside shareholder can force a change.

The family controls 66.4% of the votes with 50.2% of the capital, the Chairman is 77, and no successor is named.C (calculated)

The bylaws set an age limit of 85 for the Chairman (Article 12) and for the Chief Executive Officer (Article 16). Arnault turns 85 on 5 March 2034, and under both articles the appointment ends at the close of the shareholders’ meeting that approves the 2034 accounts, held in 2035.¹⁹ The Sustainability and Governance Committee, with the Lead Director, reviewed the succession plan on 9 December 2025.⁵¹⁹

The holding chain above LVMH is about to change. On 23 September 2026 the family told Christian Dior SE’s board of a plan to fold Financière Agache and Agache into it, turn it into a listed partnership limited by shares and rename it Agache, with Bernard Arnault and Agache Commandité as general partners. Boursier.com puts the family’s LVMH stake after the deal at 50.33% of the capital and 66.27% of the votes. The family would then offer cash for the Dior shares it doesn’t own, about 2.44% of Dior’s capital, with the offer expected to open in Q1 2027. It still needs a Dior shareholder vote, expected in December, and AMF waivers. I read that report, not the release. Nothing I read changes LVMH’s business or my values.⁵⁹

a forward-looking family group

VFinancials

LVMH’s cash flow needs three corrections before it says much: the definition, the tax and working capital.

The definition: IFRS 16 started on 1 January 2019 and was not restated, so from 2019 lease principal sits in financing cash flow. Of the €2.9B rise in operating cash flow less capital spending between 2018 and 2019, €2.2B is accounting: lease repayments of €2,187M moved out of operating cash flow. I use LVMH’s own operating free cash flow, which deducts operating investments and lease repayments and is comparable across the break.¹³⁴

Revenue was €80.8B in 2025, down 5% as reported and 1% organically. Profit from recurring operations was €17.8B, down 9%, and net profit Group share €10.9B, down 13%.⁴¹⁰ In the TTM, revenue was €79.6B, profit €17.4B and diluted EPS €21.94, 28% below the 2023 peak of €30.33.C (calculated)⁴⁶¹¹ Gross margin was 66.4%. Marketing and selling expense was 37.0% of revenue in 2025 and 38.9% in 2016.C (calculated)¹⁴⁴

First half of 2026 profit from recurring operations fell 4% to €8.7B: +€341M organic, −€686M currency and +€25M scope.⁶ Margin was 22.5%. Q3 2026 was revenue only: €18.5B, +1% reported and +1% organic, with scope at −2 points and currency at +2.⁸⁹

Cash: where it comes from and where it goes

Operating free cash flow was €11.3B in 2025, 14.0% of revenue and 104% of net profit. In the TTM it was €11.4B, 14.3% of revenue.C (calculated)⁴⁶ That conversion is high for LVMH. Over the ten years operating free cash flow was 87% of net profit, and in 2022 and 2023 it was 72% and 53%.C (calculated)^141312114 Two items explain the gap between those years and today, and I cover them in the valuation: tax paid and working capital.

Tax. The income tax charge was 32.8% of pre-tax profit in 2025, including an additional French tax on large companies that LVMH paid in cash: €661M in 2025. It was 30.0% in the first half of 2026. LVMH does not say how long the extra tax lasts, so tax is 30% in every year of every case, and a lapse to 27.5% is a sensitivity. Cash tax paid in the TTM was €4.2B against a charge of €5.4B. Over 2022 to 2025 the two were almost equal: €21,521M paid against €21,668M charged.C (calculated)⁴⁵⁶¹¹

Working capital. Working capital absorbed €10.1B from 2022 to 2025: €3.0B, €4.6B, €1.9B and €0.6B, and €1.0B in the twelve months to June 2026.C (calculated)¹²¹¹⁴⁶ Inventories were €24.2B at 30 June 2026, 30.4% of TTM revenue against 26.6% at the end of 2023, and €7.5B of the end-2025 inventory was wines and eaux-de-vie ageing in cellars.C (calculated)⁴⁵⁶ LVMH says the build balanced inventory management against expected demand, in particular in Wines and Spirits, Fashion and Leather Goods and Selective Retailing.⁴

The balance sheet

Net financial debt was €8.2B at 30 June 2026, 11.8% of equity and 0.72 times the TTM operating free cash flow. It is €20.5B of borrowings less €12.2B of cash and current financial assets, adjusted for derivatives as LVMH defines it, and LVMH has €10.8B of undrawn lines and AA- and Aa3 ratings.C (calculated)⁵⁶ Leases add €16.3B, and purchase commitments for minority shares add €6.4B, mainly the Diageo put.⁶ Brands are carried at €23.3B and goodwill at €18.6B. Vineyard land is carried at market value, €3.0B against a historical cost of €1.0B, with the gain taken to equity; other land is at cost.⁵⁶

VIValuation

How this goes badly wrong

Before any numbers I ask what would most likely hurt an owner here, and work back. I see two ways.

1. The aspirational buyer stays away. Fashion and Leather Goods made 74% of the profit. Its revenue is 13% under 2023 and its profit 24% under, because most costs do not fall with sales.C (calculated)⁴⁶ This is my bear case.
2. The cash goes into one more large deal. In the ten years to 2025 LVMH spent €24.1B net on acquisitions, 30% of its operating free cash flow. Watches and Jewelry, where Tiffany sits, earned €1,514M in 2025, less than the €1,679M of 2021.C (calculated)¹²⁴

What an owner can take out

Reported operating free cash flow is €11.4B, or €10.98B after the minority share and stock pay. That is flattering: cash tax ran €1.2B under the charge, and the cost of standing still ran at 2.0% of revenue against 3.5% on average. With both set right, an owner can take out €8.87B, about €18 a share, against diluted EPS of €21.94. That is 18% below the earnings.C (calculated)⁴⁶¹⁷

I cannot know when the aspirational buyer returns, or at what margin. LVMH gives no numeric guidance and no split of price and volume.⁴ So I show the range, €196 to €465, and the €374 is the middle of it, not a measurement.

What the price implies

Start with the multiples. At €383.85 LVMH trades at 17.5 times TTM diluted EPS of €21.94 and 12.7 times its 2023 peak EPS of €30.33. Operating free cash flow, before the minority share and stock pay, is 6.0% of the €188.7B market value; owner cash flow yields 5.8% and the dividend 3.4%.C (calculated)¹¹⁷⁶

Today’s 17.5 times is the lowest of the eleven multiples: the ten year-end multiples ran from 20.5 to 54.8 times, with a median of 24.8 times. The 10-year German yield was below 0.5% at the 2016 to 2018 year ends, negative from 2019 to 2021, 2.1% to 2.8% at the last four and is 3.39% now. After the yield, the stock is in the middle: its earnings yield is 2.3 points above the Bund, against 0.6 to 2.0 points at the last four year ends and 2.4 to 4.7 points in 2016 to 2021.C (calculated)^{1141312463334}

Then the cash. Owner cash flow is what is left after tax, capital spending, working capital, the minority share and stock pay, before interest on net financial debt. Solve the model for the price and it needs owner cash flow to grow 5.8% a year for ten years from the €8.87B I treat as normal. From the €10.98B reported it needs 3.0%.C (calculated)¹⁴⁶¹⁷ Operating free cash flow grew 11.0% a year from 2018 to 2025, and LVMH spent €18.1B net on acquisitions from 2019 to 2025, mostly Tiffany, which bought part of that growth. Profit from recurring operations has fallen 10.2% a year since 2023.C (calculated)¹³¹²⁴⁶

The bridge is the part of the model a reader should test. The TTM is flattered in two places. Cash tax of €4.2B ran €1.2B below the charge, which over 2022 to 2025 it did not, and reinvestment, working capital, lease interest and other cash costs ran at 2.0% of revenue against 3.5% on average from 2019 to 2025, both before interest on net financial debt.C (calculated)^46111213 I charge the full tax and set reinvestment at the 2019 to 2025 average.

The average was earned while revenue grew 7.1% a year, Tiffany included, against 3.8% a year in my base, and the rate does not track growth: it was 4.5% in 2019, when revenue rose 14.6%, and 4.2% in 2024, when it fell 1.7%. I therefore do not scale it down for slower growth. The average includes the €10.1B working capital outflow of 2022 to 2025; if inventory fell back to 27% of revenue, about €2.7B would return, which I do not count.C (calculated) Each 0.3 points of reinvestment is worth about €9 a share: at the 2024 and 2025 level of 2.9% the base is €392, and at the TTM’s 2.0% it is €420.C (calculated)^46111213

Read the table across. Set against today’s cash flow, the €645.00 price of 31 December 2025 would have needed 9.6% a year from the reported cash flow, or a 38.8% margin by year 5, a level LVMH has not reached in any year. Profit from recurring operations in the TTM is 2% below 2025’s. The price is 40% below its 31 December close.C (calculated)¹⁴⁶¹³

The price already pays for profit to return to about €23B by year 5, a point above its 2023 level, so a margin of safety has to come from a lower price.C (calculated)

The discount rate

I use 8.5%, a euro rate. The Bundesbank’s estimate of the 10-year yield on German federal securities, which I call the Bund, was 3.39% in Q4 2026, and Damodaran’s mature-market equity risk premium is 4.23%.³³³⁶ His implied premium of 4.20% on 1 October is a US-dollar figure measured against a 5.29% Treasury rate, so I do not use it.³⁵

The ten-year readings are 7.9% and 8.3%, and I round up to 8.5%. The five-year and three-year betas give more, and I give the three-year ones less weight because three years of monthly data are short and include the 2026 fall.C (calculated)³⁷ The sensitivity table shows 8.0% and 9.0%; the base value at 9.0% is €343, below the price. I use the Bund because France is 8% of LVMH’s revenue; the French 10-year averaged 4.44% in September.C (calculated)³⁴⁵ Net financial debt is about 4% of the enterprise value, so I use the equity rate for a flow that is before that debt’s interest.

Three cases

Revenue and margin are built group by group and the cash flow follows from them. The three cases differ only in revenue and margin by group: tax is 30%, reinvestment 3.5% of revenue, growth after year 10 is 2.5%, 90 basis points under the Bund, and the discount rate 8.5% in every case, on the same net debt and the same 491.7M shares. The cases are in euros at today’s rates (EUR/USD 1.1130), with no currency move modelled; currency took 3 points from 2025 revenue and 5 points from the first half of 2026.³⁴⁶⁹

Base, €374. Profit from recurring operations is €23.0B in year 5, a point above its 2023 level of €22.8B, and Fashion and Leather Goods regains its 2023 profit: €16.5B against €16.8B. Fashion and Leather Goods revenue is −1.0% in year 1, with the third quarter at −5% and the sale of Marc Jacobs, then 5.5% a year, which regains the 2023 revenue of €42.2B in year 4 and puts the group at €45.1B in year 5. Its margin goes from 34.7% to 36.5% in year 5, 3.4 points below 2023, and 37.0% in year 10, level with 2024’s 37.1%. Wines and Spirits recovers part of its fall, from 20.0% to 24.0% against 31.9% in 2023; Watches and Jewelry goes from 14.9% to 17.0%, against 19.8% in 2023. Selective Retailing is flat in year 1 as DFS leaves, then grows 4%. The Group’s margin goes from 21.9% to 23.8% in year 5 and 24.6% in year 10, below 2023’s 26.5% and above the 18.7% to 21.4% of 2016 to 2019.E (estimate)⁴⁶⁹¹²

Two checks on that margin. Fashion and Leather Goods is 46% of revenue today against 34% in 2016 and 41% in 2019, and if every group earned its 2019 margin on today’s mix the Group would earn 22.1%, so the 24.6% needs more than mix. It needs Fashion and Leather Goods at 37.0% against 33.0% in 2019, a level the group held in 2024.C (calculated)⁴⁶¹³

My base is 4.2% a year over the five years, with −1.0% in year 1 and 5.5% after it. That is under the 12.1% a year of 2017 to 2025 and the 6.5% of 2022 to 2025, and above the 2.4% of 2023 to 2025. Bain and Altagamma expect low- to mid-single-digit growth for the personal luxury market in 2026 at constant rates, so years 2 to 5 sit above the market and need Fashion and Leather Goods to take share or raise prices.³¹ Each point off years 2 to 5 is worth €10 to €11 a share: at 3.5% a year the base is €354, and at 4.5% it is €364.E (estimate)⁴⁶

Bear, €196. The aspirational buyer does not come back, and prices cannot rise further. Fashion and Leather Goods revenue falls 6% in year 1, a little faster than the third quarter’s 5%, which LVMH partly attributes to a one-off logistics problem at Louis Vuitton that its presentation did not size, then 1% a year to €33.2B in year 5, 21% below 2023. Taking the one-off out would make the third quarter better than −5%, so the year-1 decline assumes the underlying trend is weaker than the reported quarter. Its margin falls to 28.5%, below its 2016 level of 30.3%, and the Group’s to 17.3%, below the 18.6% of 2020. Profit falls another 23%, to €13.5B, the size of the fall from 2023 to today.E (estimate)⁹¹²¹³ Prices that buyers will not pay and a client base that does not return are the mechanism Bain describes.³¹

Bull, €465. Luxury demand returns to 5% to 8% growth in the groups that matter. Fashion and Leather Goods grows 7.5% a year for four years and reaches a 38.5% margin, close to 2023’s 39.9%, and the Group’s margin reaches 25.6% in year 5 and 26.6% in year 10, the level of 2021 to 2023. Profit is €27.1B in year 5, 19% above its peak.E (estimate)¹²⁴⁶

Weighted 25%, 50% and 25%, the cases give €352 a share, and the price is 9% above it.E (estimate)⁴⁶ The skew is down: the bear value is 49% under the price and the bull value 21% over it. Terminal value is 60% of the base enterprise value, 55% of the bear and 61% of the bull.

The chart swaps one input at a time. Growth and margin each carry about the same weight, and the downside of getting either wrong (−€101 for growth, −€104 for margins) is larger than the upside of getting it right (+€54 and +€32). A margin stuck at today’s 21.9% with my base revenue is worth €336. Tax and reinvestment move the value about as much as a point of margin: the 2025 tax rate of 32.8% takes €21 off, a lapse to 27.5% from year 3 adds €17, and reinvestment at the 2024 and 2025 level adds €18.E (estimate)¹⁴⁶

My terminal value is an enterprise value, so the like-for-like check is profit from recurring operations: my base ends at 9.0 times year-10 profit from recurring operations, against 11.3 times today on an enterprise value of €197.0B.C (calculated)¹⁴⁶¹⁷

What the cases leave out

Two timing conventions keep every value on the low side. The values are dated 30 June 2026, the last balance sheet; dating them Q4 2026 adds 2.6%. Cash flows fall at year end; mid-year flows add 4.2%. Together they are worth about €26 on the base, and I leave them out as cushion.E (estimate)⁴⁶¹⁷

I use 491.7M shares outstanding at 30 September 2026 against net debt at 30 June. The outstanding count fell by about 1.4M in the third quarter, 0.3% below the count at the balance sheet date, so the per-share values are flattered by less than that.¹⁷⁶

The cases also leave out any value for DFS or Marc Jacobs and any value for the Moncler holding beyond its book value.

The margin of safety

• Price€383.85Close, Q4 2026 [1]
• Base value€374My estimate E (estimate)
• Margin of safety below€26230% under my base value, my rule when one cycle drives results, to the euro below C (calculated)

I use a 30% cushion, my rule when one cycle drives results. Luxury demand is one cycle, and the group it drives makes 74% of the profit; a 40% fall in the price this year shows how fast the multiple moves. My rule adds five points when fixed charges such as leases sit ahead of the shares. LVMH’s leases are €16.3B, 9% of the market value, and the €3.5B a year paid on them is 20% of profit from recurring operations, so I do not add them. The €6.4B Diageo put, 3% of the market value, is already in the cash flow through Diageo’s share of profit, so it is not a separate fixed charge. At €262 the price is 11.9 times TTM EPS, the owner cash yield on the reported TTM is 8.5%, my bear value is 75% of the price, and the base case returns about 13% a year.E (estimate)¹⁴⁶ At €383.85 the price sits 47% above the margin-of-safety price.

The return in each case assumes the shares are worth my terminal value in year 10. At €383.85 the bear case returns 0.2% a year, close to nothing, the base 8.2% and the bull 11.0%. At €262 the bear case returns 4.7%, above the 3.39% Bund.E (estimate)³³

Against the next best use

The same €383.85 could earn 3.39% in 10-year German bonds.³³ The closest company on this site is Ferrari, whose base case returns 0.3% a year, against 8.3% here.⁶⁰ Even so, 8.3% is just under the 8.5% I discount at.E (estimate) How good the business is and how good the price is are two questions. A 34.7% margin in Fashion and Leather Goods answers the first. A price 3% above my base value and 47% above my margin-of-safety price answers the second.

The base needs three things together: Fashion and Leather Goods growing 5.5% a year for four years, its margin back to 36.5%, and no large deal that eats the cash. At two chances in three each, all three come to about 3 in 10.E (estimate)

How the price got here

LVMH closed at €383.85 on 29 October, the latest confirmed Paris close from Yahoo Finance; the 30 October close was not yet in the feed when I looked, and the last trade that day was €386.40.¹⁴⁹ The ADR (LVMUY) closed at $85.93; at the ECB’s 1.1130 and five ADRs to a share, that is €386.03, about 0.6% above the Paris close, a gap I put down to the ADR closing in New York hours after Paris. The ratio is inferred from the prices; I did not retrieve the depositary’s terms.²³

The price fell 15.2% in January, 14.9% in March and 14.0% in September, and moved less than 5% in each of the other months.C (calculated)¹ LVMH published results after the Paris close, at about 17:45 local time, on 27 January, 13 April and 12 October, and at about 17:55 on 27 July, so the reaction is the next close against the release day’s. It was −7.9% on 28 January, −0.1% on 14 April, +0.8% on 28 July and −0.1% on 13 October.C (calculated)^1102678 The January fall followed a release that put fourth-quarter organic growth at +1% and Fashion and Leather Goods at −3%. Organic growth in the three quarters of 2026 was +1%, +3% and +1%. I could not retrieve wire or broker coverage of the January fall or the September one, so I cannot say what the market expected. LVMH’s own explanations of weak results are these:

• China. The Fashion and Leather Goods group was affected in the third quarter by the slowdown in demand in China, and Asia excluding Japan was 35% of its 2025 revenue.⁸⁵
• A Louis Vuitton logistics problem. The third-quarter presentation lists a one-off logistics problem at Louis Vuitton, which the presentation does not size.⁹
• The Middle East. The conflict in March took about 1 point off first-quarter Group organic growth, about €0.2B of revenue, and Fashion and Leather Goods fell 2% that quarter; second-quarter growth was 3%, or 4% excluding it.C (calculated)²⁶⁷
• US tariffs and cognac duties. LVMH names tariffs in the United States as a headwind for Wines and Spirits in 2026, and a report of China’s anti-dumping ruling on EU brandy gives margins of 27.7% to 34.9%, which I did not check against the MOFCOM notice.⁵³⁹³⁸

By profit at risk, China and the logistics problem sit in the group that earns 73% of profit. The Middle East touches Group revenue, and tariffs and cognac sit in the group that earns 6%. I read the fall as a judgement on Fashion and Leather Goods, which was negative in two of the three quarters of 2026, more than on the Group’s +1%, +3% and +1%, but I cannot show that from the sources I have.C (calculated)⁴⁶⁹

Where this could be in 5 and 10 years

In the base, today’s €374 becomes about €445 in June 2031 and €511 in June 2036. For year 5 to hold, profit from recurring operations has to reach €23.0B, with Fashion and Leather Goods back to a 36.5% margin. For year 10 to hold, profit has to keep growing about 4% a year, with reinvestment at 3.5% of revenue. Year 10 leans harder on the discount rate and on 2.5% growth after it, because the terminal value is 60% of the base.E (estimate)

The bear and the bull differ on growth and margin, and on nothing else. In the bear, revenue grows 1.0% a year and the margin falls to 17.3%, so owners receive €138 a share in ten years and the value ends at €245. In the bull, revenue grows 5.3% a year and the margin reaches 26.6%, which gives €649. The discount rate moves all three: at 9.0% the base is €343 today, not €374.E (estimate)

The most likely way the base is wrong is the margin. If it stays at today’s 21.9% on my base revenue, today’s value is €336, not €374.C (calculated)

These are estimates of value, not forecasts of the share price. The price can sit above or below value for years.

VIIThe case for the price

What most people miss

The headline says first-half profit fell 4%. Currency did that. LVMH’s own bridge shows a €341M organic gain and a €686M currency loss.⁶ On the third-quarter call, CFO Cécile Cabanis said currency “turned positive in Q3 after 5 consecutive negative quarters” on revenue. Margins lag: she put the second-half drag at about 0.7 points and expects it to ease in 2027, except in Wines and Spirits.⁵⁰

She also sized the Louis Vuitton logistics problem the slides left unsized: “a bit more than 1 point” of that brand’s organic growth. Asked about Fashion and Leather Goods, she said the exit rate “did improve across the quarter”.⁵⁰

The family bought too. Arnault said at the January results that the stake would pass 50% this year, GuruFocus reported.⁵³ AMF declarations, gathered by an aggregator, show 18 market purchases to mid-March: 1,230,382 shares for about €660M, an average of €536, 40% above today’s price.⁵¹ The stake crossed 50% on 19 February.⁶⁵² The same report has a family spokesperson citing confidence in LVMH’s future.⁵³ The buying also took the family past 50%, so I don’t read the price paid as a call on value.

The bull case

Oakmark has the plainest version. Its commentaries show the Global Fund buying LVMH in Q2 2026 and the Global Select Fund in Q3, 1.8% of assets and already a top detractor.⁵⁴⁵⁵ The managers like its spread and a scarcity model of limited editions and small runs. They write: “We expect the industry to recover to historical levels.”⁵⁵

The rest comes from press and wire summaries, not the notes. Goldman Sachs began coverage around 5 October with a €500 target. It expects Fashion and Leather Goods to grow again next year, on a steadier Louis Vuitton, a Dior recovery and cost discipline.⁵⁶ UBS’s Zuzanna Pusz cut her target to €510 on 12 October but still likes the risk and reward, given very depressed sentiment and a low valuation.⁵⁷ Bernstein’s Callum Elliott kept €480 on 19 October, in a note on China cosmetics.⁵⁸

Against reality

The price is 3% above my €374 base. Any one of three things about closes that gap: Fashion and Leather Goods growing 6.5% a year in years 2 to 5 against my 5.5% (€385), half a point more Group margin from year 5 (about €384), or reinvestment at 3.2% of revenue against 3.5% (€383) E (estimate). So if they do what my base says and beat it on one of those, the price is possible.

The base is the hard part. It needs Fashion and Leather Goods at €45.1B of revenue and a 36.5% margin in year 5, from €36.8B and 34.7% today, and Group profit up 32% to €23.0B E (estimate). Today growth is −5% against the 5.5% I need, and the first-half margin was 34.1%.⁹⁶ My −1.0% for year 1 needs about flat reported revenue over the next three quarters C (calculated).⁹ The share gains aren’t showing yet: Hermès’s leather goods grew 9.8% in the first half against −1% here.²⁷⁶

The targets ask for more. On my model, €480 to €510 today needs owner cash flow to grow 8.6% to 9.4% a year, against 5.8% at the price and 8.0% in my bull. Brought back a year at 8.5% with the €13 dividend, €500 is about €473, close to my €465 bull C (calculated).

What they have to hit

The thresholds match the risks table below. Year 5 is the year to June 2031.

Where I come down

The currency point moved me most, because some of the margin fall looks temporary. It doesn’t change my €196, €374 and €465, because my base already adds 1.8 points to that group’s margin by year 5. Two quarters above +4% with a margin above 36% would raise my values.

VIIIRisks, and what would change my view

Five risks matter most: a luxury cycle that does not turn, Asian demand, the margin of Fashion and Leather Goods, working capital and a family succession with no named successor. The table tracks each one with the rest.

Sources: LVMH’s quarterly and half-year releases, the 2025 URD and the Bain-Altagamma study.⁶⁸⁹⁵³¹

Two trade measures sit outside the cases. LVMH names tariffs in the United States as a headwind for Wines and Spirits in 2026; a trade explainer of August 2025 puts the US tariff on EU wine and spirits at 15%. A report of China’s final ruling on EU brandy gives dumping margins of 27.7% to 34.9% for five years, with price undertakings accepted. I checked neither against a current government notice.⁵³⁹³⁸

What would raise my base value: Fashion and Leather Goods growth above 4% for two quarters with a margin above 36%; inventory falling toward 27% of revenue; and the French additional tax lapsing, worth €17 a share. What would lower it: another year of negative organic growth in Fashion and Leather Goods; Asian store closures that do not stop; tax staying at the 2025 rate, worth −€21 a share; the Diageo put exercised, which would cost €6.4B and bring back about €0.2B a year of profit; or a succession event before a successor is named.⁹⁶⁵⁴

What I could not verify: any maison’s revenue or profit, China revenue, DFS profit, Tiffany’s profit, the prices of the DFS and Marc Jacobs sales, how LVMH’s price, volume, mix and cost moves split the fall in the Fashion and Leather Goods margin, how long the French additional tax lasts, why the price fell 40% (I found no wire or broker coverage of the January and September falls), peer valuation multiples, Richemont’s return on capital, Fashion and Leather Goods organic growth for 2016, and the sector’s growth by year. A scope-adjusted TTM cannot be built from the filings, so the TTM still holds DFS up to its sale and all of Marc Jacobs.⁴⁶