Should LVMH brace for bigger losses?

LVMH had somewhat of a turbulent start to the year after reporting underwhelming holiday numbers last month. While organic revenue in the fourth quarter was up 1% at $27.2 billion (flat from the previous year), full-year revenues dropped 1%.

LVMH chairman and CEO Bernard Arnault warned that 2026 “won’t be simple,” leading to a sharp drop (~8%) in its shares and rattling the luxury sector.

A cocktail of geopolitical factors, tariffs, and overall global uncertainty have weighed on performance and impacted consumers’ buying behaviors, Michael Prendergast, managing director in the consumer and retail group of Alvarez & Marsal, told Retail Brew.

“Macro luxury has been on an aggressive upward trend for somewhere between 10 to 15 years,” he said. “Bernard Arnault mentioned that they’ve doubled their business in 10 years. The engine in luxury has been operating at 120 miles an hour, and it has not been a bumpy ride. At some point, just from a macro economic standpoint, you’re bound to have some form of turbulence.”

An essential point of concern for analysts has been the decline in high-end fashion and handbags, long the conglomerate’s core revenue driver. But Prendergast said the slowdown doesn’t signal a deeper unraveling. Instead, he believes shoppers are briefly stepping back amid wider economic and geopolitical pressure.

“The luxury customer has continued to show strength and resilience but at some point, the macro factors start to creep in in different ways, and it becomes sort of a psychological thing,” he explained, adding that the luxury consumer is “not disappearing.”

“The people that are at the top of the financial pyramid and the strong luxury customers, although they’re taking a break, that mindset does not change,” he said. “They’re just sitting on the sidelines right now.”

If anything, the bigger looming challenge, he argued, may be tariffs.“There is a hidden freight train that’s coming,” Prendergast said. “Everyone talked about mitigating tariff damage in 2025 but a large portion of that mitigation was on the existing inventory base. As you get into 2026, especially third and fourth quarter, all of that mitigation resets itself at a much higher base of purchase prices.”

So what can retailers like LVMH do to brace for an unpredictable year? Strategically, Prendergast advises retailers to double down on operational efficiency and reinvest in customer-facing areas—from marketing to design to creative talent—supported by improvements in process, technology, and staffing.Despite the near-term volatility, however, he believes LVMH is well-positioned to succeed in the long term.

“They’re getting sharper in their branding; they’re reinvesting in their stores,” he said. “At some point, there’s going to be some bumpy performance. However, what they’re focusing on is correct and will position them very well for future positive performance.”