LVMH
Can it renew desire and create value again?

LVMH sells products, but its economic engine is desire. A handbag can last for years. The decision to buy another depends on whether the brand continues to represent something its customer values.

That is the capability investors need to assess. Accumulated prestige is a powerful asset. Preserving it can require decisions quite different from those that built it.

Our central thesis is that LVMH retains the resources to renew its brands, but the returns on that renewal may fall short of what investors became accustomed to. Recovering sales would help. For shareholders, the decisive measure is cash flow per share after paying for that recovery.

The investment question: can LVMH restore profitable growth at a price that rewards investors even if the recovery is slow?

Reported information is attributed through numbered sources. Interpretations, scenarios and valuation assumptions are MITUXA View. This article does not use consensus forecasts.

What the earnings decline tells us

Sources: LVMH's 2024 and 2025 annual results [1–2]. MITUXA calculations show that revenue fell approximately 6% between 2023 and 2025, while recurring operating profit declined 22% and Group net profit fell 28%.

The gap reveals how sensitive earnings can be to activity and operating conditions. It does not establish that weaker pricing power caused the entire decline: currencies, sales mix and investment also matter. It does make an automatic return to historical margins a dangerous valuation assumption.

In the first half of 2026, Group organic revenue rose 2%, while revenue reported in euros fell 3%. Recurring operating profit declined 4%. Fashion & Leather Goods moved from a 2% organic revenue decline in the first quarter to 1% growth in the second [3]. Management described improving trends in the United States and Asia excluding Japan; the latter must not be treated as a China-only measure.

MITUXA View: commercial conditions are stabilising. Evidence of a sustained new earnings expansion remains limited.

What makes the brands valuable?

A luxury brand combines recognition, heritage, product execution and control over the customer experience. Scale can support recruitment, investment and distribution. It also creates tension: selling more without becoming too commonplace.

Customers have no contractual obligation to buy another handbag. Loyalty rests on desire rather than a technical switching cost. The competitive advantage therefore needs to be tested repeatedly.

Higher prices improve earnings while demand holds. If they begin to drive customers away, they can create a temporary impression of strength. We want evidence of healthy demand for products and growth in the customer base. Organic revenue growth is not a measure of unit volumes: it also includes price and mix.

The disclosures reviewed do not provide a sufficiently complete brand-level price-and-volume breakdown. That limits confidence in any categorical assessment of underlying demand.

Renewal is visible. Its return still needs to be measured.

Management attributed part of the first-half improvement to Jonathan Anderson's initial designs for Dior, highlighted collection changes at other houses and pointed to the performance of new Louis Vuitton stores in Beijing and Seoul [3].

These developments challenge the idea of complete organisational inertia. However, they are management observations without full standalone financial statements for each brand. A successful collection or a busy flagship store does not, by itself, demonstrate an attractive investment return.

The mechanism we want to see is straightforward: new products attract demand; demand lifts sales across existing stores; store productivity improves; and incremental earnings exceed the cost of collections, marketing and investment. If that sequence breaks down, creative renewal may produce insufficient financial value.

Acquisitions: Tiffany is the test

LVMH completed the Tiffany acquisition in January 2021 for approximately US$15.8 billion [5]. Its size and the years of subsequent transformation make it a meaningful test of management's ability to develop an acquired brand.

In its 2024 results, LVMH stated that Tiffany's high-jewellery revenue had quadrupled since the acquisition and that its operating profit had doubled [1]. Those are different measures. They do not mean that Tiffany's total revenue quadrupled.

Assessing the economic return requires the purchase price, subsequent investment, taxes, inventory requirements and cash generation. The information reviewed does not provide a complete standalone series from which to calculate acquisition ROIC reliably. Growth in a collection or operating profit cannot substitute for that calculation.

The June 2024 acquisitions of L’Épée 1839 and a majority interest in Chez L’Ami Louis add specialist capabilities and luxury experiences [6–7]. The announcements do not allow us to quantify their contribution or investment returns adequately. We treat them as strategic additions without assigning a separate valuation premium.

The initial 10% investment in Double R, announced in September 2024, provided indirect exposure to Moncler. It was not an acquisition of Moncler. The agreement allowed LVMH's interest in the holding vehicle to increase [8]. Our base case does not assume a subsequent full takeover.

Disposals deserve equal scrutiny. The first-half report refers to the sale of DFS's Greater China businesses and an agreement to sell Marc Jacobs [3]. Portfolio changes can release resources, but value creation depends on proceeds and investment avoided relative to future earnings surrendered.

MITUXA View: deal activity is a weak measure of ambition and an even weaker measure of value creation. What matters is the additional cash generated per euro invested.

Why the largest earnings engine still dominates

Fashion & Leather Goods generated €6.195 billion of recurring operating profit in the first half of 2026, approximately 71% of the Group total. Watches & Jewelry contributed €831 million [4].

A simple sensitivity illustrates the difference in scale:

These are calculations, not forecasts. Tiffany's success can improve diversification, but the recovery of the largest profit contributor remains decisive. A positive development at a smaller house should not be extrapolated to the entire Group.

Cash flow: the source of improvement matters

First-half operating free cash flow increased from €4.032 billion to €4.100 billion. Operating investment fell from €2.360 billion to €2.061 billion, while working capital absorbed more cash. LVMH's operating free cash flow definition already deducts lease repayments [4].

The modest cash improvement is positive, but does not independently establish better capital productivity. Lower investment might reflect discipline or simply timing. A sequence of reporting periods is needed to distinguish the two.

June net financial debt was €8.245 billion, versus €6.857 billion in December and €10.176 billion a year earlier. It excludes lease liabilities, which totalled €16.261 billion [4]. Sequential and annual comparisons tell different stories.

A sound ROIC calculation would require average invested capital, consistent lease treatment and goodwill inclusion when assessing acquisitions. We do not publish a precise ROIC without that reconciliation. A high operating margin does not substitute for a return on all the capital employed.

Arnault: replace speculation with observable decisions

The suggestion that extraordinary success could weaken the incentive to reinvent is useful as a question. It is not evidence about Bernard Arnault's personal motivation.

The family restructuring announced in September seeks to preserve control of LVMH, with Arnault remaining managing partner of the proposed structure [9]. It demonstrates an intention to preserve ownership continuity, rather than proving future operating effectiveness.

We will assess team autonomy, willingness to correct mistakes, executive retention and succession transparency. Family control can support long-term decisions while limiting minority shareholders' influence.

A well-managed transition could introduce new ideas. Conflict or weak leadership choices could impair returns. Neither the leader's age nor his wealth is sufficient evidence to decide between those outcomes.

Competitive comparisons need comparable businesses

Hermès and Richemont are useful references for examining scarcity and leather-goods execution, and the economics of jewellery, respectively. We do not apply their valuation multiples to LVMH in this article: a current, like-for-like financial comparison has not been completed.

The relevant comparisons concern margins, growth, capital intensity and customer exposure. A lower multiple is only an opportunity if differences in quality and growth do not justify the discount.

Valuation: what is recovery worth today?

Our reference price is €378.55, the Euronext Paris close on 2 October 2026, reported by Zonebourse [10].

The first model estimates sustainable annual earnings at an October 2029 horizon, then discounts the share value and three annual dividends back to October 2026. It is a terminal-multiple valuation rather than a full cash-flow DCF.

Calculation: EPS = revenue × operating margin × 61% ÷ shares. Present value = EPS × terminal P/E ÷ 1.10³, plus dividends discounted at the end of years one, two and three.

The 61% conversion approximates the relationship between 2025 Group net profit and recurring operating profit. It includes financing, tax, minority interests and other below-recurring-operating-profit effects; it is not a tax rate. The 495 million share count rounds the first-half 2026 average. We assume no additional benefit from buybacks.

The base case assumes a moderate recovery: revenue approximately 11% above 2025 and a margin one percentage point higher. It is more demanding than flat operating performance. The bull case requires substantially stronger execution. Multiples are MITUXA judgements, not verified peer medians.

Dividends are placed at annual anniversaries for simplicity rather than on actual payment dates. Values are before investor taxes and dealing costs. The 10% discount rate is a model requirement, not a promised return. Debt and leases are not deducted again from an equity valuation based on earnings after financing charges; this assumes a sustainable financing structure.

The €416 base case is approximately 10% above the reference price. Applying MITUXA's 25% margin-of-safety rule to this model alone would produce an arithmetic threshold near €312. That is not a validated entry price: the cash-flow test below does not support it as a standalone purchase threshold, and it does not establish qualification under all MITUXA Signals criteria.

Reducing the base-case terminal P/E from 20× to 18× lowers present value to approximately €377, with all other inputs unchanged. Even a reasonable operating recovery can leave limited valuation protection.

A second test: what can cash generation support?

A multiple-based valuation incorporates what another investor might pay in the future. A cash-flow model makes the economic distributions supporting that price more explicit.

Reported 2025 operating free cash flow was €11.333 billion [2]. As a working approximation of cash available to LVMH shareholders, we deduct €415 million of minority dividends and €165 million of recognised share-based compensation, both 2025 figures shown in the interim report's comparative disclosures [4]. This gives €10.753 billion, rounded to €10.75 billion.

This is an analytical proxy, not reported free cash flow to equity. Minority dividends need not equal minorities' economic share of cash generation. Deducting share-based compensation recognises a recurring economic cost; we do not also deduct every share repurchase, which would double-count part of that effect.

The starting cash flow is after operating investment, working capital, interest, taxes and leases. We assume no permanent net inflow from additional borrowing. Discretionary acquisitions are excluded, and we include no growth that depends on them. Any future acquisition must be assessed together with its purchase cost and incremental cash flows.

The model discounts five annual cash flows, with the first received one year after the valuation date, and adds a perpetuity from year six. It uses 495 million shares and nominal euro growth assumptions.

Calculation: equity value equals the sum of C₁ × (1+g)^(t−1)/(1+k)^t for years one to five, plus C₅ × (1+gₜ)/(k−gₜ)/(1+k)^5. Divide by 495 million shares. Here, k is the required equity return and gₜ is perpetual growth.

Because these cash flows are after financing and lease payments, the model does not deduct net financial debt and leases again as an enterprise-value DCF would. It assumes sustainable refinancing and continuity of the financing structure. Dividends are not added separately: they are a use of the same cash.

One additional obligation needs attention. Purchase commitments for minority interests totalled €6.416 billion in June 2026 [4]. Their exercise dates and the incremental economic interests acquired are not modelled. Deducting the entire amount without adding acquired cash flows would be incomplete; ignoring the potential payment would also be incomplete. This is therefore a continuation-of-ownership scenario rather than a complete valuation of every contractual option.

Why do €280 and €416 differ?

The models make different economic assumptions. The earnings model allows an investor to pay 20 times the earnings of a recovered business in three years. The cash-flow model requires growth and distributions to support a 10% equity return over time.

A 20× multiple could be justified by longer-lasting growth, stronger cash conversion or a lower market-required return. It should not be treated as a permanent attribute of the LVMH name.

We do not average the outputs to manufacture a compromise fair value. Their divergence identifies the question requiring further evidence: how much recovery and durable growth are we financing in advance?

What would justify the reference price?

Holding first-stage growth at 3%, perpetual growth at 2% and the required return at 10%, a €378.55 share price would require initial annual cash flow of approximately €14.5 billion—around 35% above the €10.75 billion working base.

This is a conditional reverse calculation, not a claim that the market forecasts precisely that cash flow. The same price can also be supported by accepting a lower required return.

Initial cash flow and first-stage growth are unchanged. Approximately 69% of base-case value at a 10% required return comes from the terminal value. Small changes in long-term assumptions have substantial consequences.

The consequence for an entry price

The €312 threshold from the earnings model is not adopted as an investment entry level. It results from applying a discount to only one model. Applying the same 25% margin to the cash-flow base case gives approximately €210, but that figure also depends on assumptions requiring refinement. We do not adopt it as a new definitive target.

To justify buying near the reference price with a 10% required return, we would need evidence of greater normalised cash generation, more durable growth, or both. Otherwise, an investor must accept a lower expected return or wait for a lower price.

Detailed investment and working-capital projections, minority-interest treatment and a reconciled ROIC analysis remain necessary before assigning high conviction to a single fair-value estimate.

What would change our view?

We do not assign numerical probabilities at this stage. Structural loss of relevance and a poorly managed leadership transition would have high potential impact. Two half-year periods of operating deterioration despite renewal would trigger a fresh review—not automatically prove irreversible decline.

MITUXA Investment View: WATCH

LVMH shows sufficient evidence of adaptation to merit continued attention. The information reviewed does not substantiate a conclusion that Arnault has lost interest, nor does it establish that renewal will reproduce historical returns.

The strongest positive case is profitable recovery within existing brands. The main valuation risk is paying for that recovery in advance while also assigning value to acquisitions that have not happened.

At €378.55, the earnings model offers modest headroom, while the central cash-flow test is more restrictive. That gap prevents us from validating a single entry price. Our WATCH conclusion rests on a concrete issue: the share price still requires favourable assumptions about cash generation, durable growth or the return investors are willing to accept.

When LVMH sells more again, how much of that growth will ultimately belong to each shareholder?

Sources and scope

1. LVMH: 2024 annual results, January 2025; historical figures and Tiffany commentary.
2. LVMH: 2025 annual results, January 2026.
3. LVMH: first-half 2026 results, 27 July 2026.
4. LVMH: first-half 2026 financial report; segment results, cash flow, financing, leases, minority interests and average share count.
5. Reuters: completion of the Tiffany acquisition, 7 January 2021.
6. LVMH: acquisition of L’Épée 1839, 25 June 2024.
7. LVMH: Chez L’Ami Louis investment, 20 June 2024.
8. Reuters: Double R and Moncler transaction, 26 September 2024.
9. Christian Dior SE: proposed simplification of family corporate structures, September 2026; announced proposal, not assumed completed.
10. Zonebourse: MC quotation, Euronext Paris; 2 October 2026 closing price, accessed 3 October.

Models and interpretations are MITUXA's own. This article does not incorporate third-quarter 2026 results. A detailed current peer comparison, brand-level price/volume decomposition and full ROIC reconciliation remain outside its scope. Scenario outputs are estimates, not price forecasts or guaranteed returns.

Independent research. Not financial advice.

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