Luxury’s New Pecking Order

Amid a flurry of leadership shakeups, luxury’s momentum is shifting — and not in the favour of LVMH or Kering.

Tuesday, shares in LVMH fell following its announcement that fashion and leather goods sales fell 5 percent in the first quarter, missing analyst estimates. For the first time, the conglomerate briefly lost its position as luxury’s biggest player in terms of market capitalisation to Birkin-maker Hermès.

As LVMH faced tough questions about the steps it is taking to revive creative momentum at its second-biggest brand, Dior, the group finally revealed plans for Jonathan Anderson to take the helm of Dior Men’s Fashion, succeeding Kim Jones.

While LVMH was able to quickly recover its status as luxury’s top powerhouse, Hermès’ growing dominance demonstrates a larger shift in the industry: in the absence of aspirational shoppers who once fuelled sales for items like Gucci crossbodies and Dior sneakers, the new winners are brands that cater to the most elite echelon of consumers — high-net-worth individuals insulated from economic strain.

Hermès is not the only beneficiary to these shifting tides: Moncler is closing in on fashion’s second-in-line conglomerate, Gucci- and Balenciaga-owner Kering. Brunello Cucinelli traded market caps with Burberry, whose valuation was more than double the Italian label’s just a few years ago. Cartier-owner Richemont, too, has pulled ahead of the pack, while Prada’s differentiated product and marketing strategy has swayed shoppers from its struggling rivals, however deep their pockets.

Hermès has weathered the downturn by trading on scarcity and high demand for its Birkin and Kelly handbags. In a show of strength this week, the French brand announced plans to fully pass tariff costs onto its wealthy clientele, starting May 1.

That positioning has appealed to investors: with €15 billion in annual revenue versus LVMH’s €84 billion, Hermès is trading at a price-to-earnings ratio (a measure of investors’ willingness to pay a premium on a company’s earnings) of 55 to LVMH’s 20.

Meanwhile, LVMH is reworking its creative and executive ranks. Lower consumer confidence as the result of tariffs could further hamper demand, particularly in the US, where sales were down 3 percent in the first quarter.

Off the back of a transformative 11-year tenure that turned Loewe — with an estimated annual revenue of over €1.3 billion to Dior’s estimated over €10 billion — into an outsize cultural force, LVMH is hoping Anderson can refresh a Dior that has stagnated in recent months. This quarter, Dior’s sales were below the average 5 percent sales decline across its fashion division, chief financial officer Cécile Cabanis said on the earnings call.

It’s no secret Kering, currently revamping crown jewel Gucci, has had a challenging year. As its market capitalisation sinks, Italian Prada and Moncler groups are closing in.

Growth at Prada — which just bolstered its ranks with Versace — has been driven by its “little sister” Miu Miu, whose innovative marketing and product approach have successfully wooed younger shoppers.

It’s a change of fortune for Prada Group: Though Prada’s creativity has long been revered by fashion insiders, growth lagged behind its peers just a few years ago. Sales growth was just 3 percent between 2017 and 2018, compared with 15 percent in 2024. Moncler Group, meanwhile, has been driven by its foothold in the tough China market.

Nowhere is luxury’s new reliance on the ultra-wealthy more apparent than billionaire-favourite Brunello Cucinelli and the ailing Burberry.

In recent years, Burberry failed to move upmarket alongside competitors, suffering from a strategy based too much on fashionability and elevation rather than what core consumers want to buy. After sales plummeted 22 percent in July 2024, the British label tapped former Coach and Michael Kors boss Joshua Schulman to get the Burberry back on track.

Brunello Cucinelli, meanwhile, is outperforming. This week, the label reported a 10.5 percent growth in sales for the first quarter.

“One thing we are certain about, [is] what we must do … is always remain unchanged.” said the Cucinelli, chairman and creative director, on a call with investors.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Hermès will hike prices to cover US tariff risks. First-quarter sales growth missed analyst expectations, but still outperformed the broader luxury sector. The luxury group announced Thursday it plans to shift the burden of tariffs in the US to its wealthy clientele by adding a premium to all products sold in the US, on top of regular price adjustments.

Valentino sales slipped by 2 percent in 2024. The Italian brand’s full-year revenues fell to €1.31 billion. While retail sales rose 5 percent in 2024, operating profit fell 22 percent to €246 million as the group invested in overhauling its collections and image under new creative director Alessandro Michele.

Brunello Cucinelli reported 10.5 percent sales growth in the first quarter. The Italian luxury fashion group announced it had performed well in retail and wholesale channels and confirmed expectations for 10 percent sales growth in 2025 and 2026, despite looming US tariffs. Sales came in at €341.5 million ($388.2 million), close to analyst expectations.

Moncler Group revenues rose 1 percent. First quarter sales rose 1 percent to €829 million, up 1 percent year-on-year and just above analyst expectations. Asia and the company’s DTC channels outperformed in a slow quarter. The group said it was more concerned about US consumer sentiment than the direct impact of potential tariffs.

LVMH shareholders agreed Bernard Arnault can remain CEO until he is 85. In a nearly unanimous vote, the luxury conglomerate’s shareholders voted Thursday to change company bylaws to raise the maximum age of its chairman and CEO to 85.

Shein and Temu will raise prices in response to tariffs. The fast-fashion retailers announced that price hikes will begin on April 25, anticipating the Trump Administration’s plan to end the de minimis tax loophole on May 2. Shein and Temu have seen US sales skyrocket since Trump’s initial tariff announcements.

Forever 21 creditors face large losses under the bankruptcy plan. The fast-fashion retailer’s restructuring plan envisions paltry recoveries on its debts, a lawyer for the company’s unsecured creditors said on Tuesday.

Nike is set to build out a new Shanghai studio. The sportswear company is opening a creative studio in Shanghai called Icon Studios, tasked with content creation including digital videos and product photography, to recapture its Chinese market. In fiscal 2024, Chinese shoppers constituted 15 percent of global sales, down from 19 percent in fiscal 2021.

NGOs filed a complaint against the EU’s moves to water down sustainability regulations. A group of seven NGOs lodged a complaint with the European Ombudsman, calling the European Commission’s efforts to roll back key sustainability regulations like environmental reporting requirements and supply-chain oversight “undemocratic, untransparent and rushed.”

The Arab Fashion Council launched a $500,000 designer fund. The AFC Fashion Fund will support emerging fashion labels from Arab countries by investing $500,000 in one designer’s brand every two years.

A Chinese couple shot dead in Rome in a mafia-style killing has been linked to a textile industry turf war. Police said the murders of Zhang Dayong and Gong Xiaoqing outside their home in the Roman neighbourhood of Pigneto may be linked to the so-called “Coat Hanger Wars” between criminal gangs who specialise in the textile sector.

THE BUSINESS OF BEAUTY

LVMH perfumes and cosmetics revenue declined 1 percent. The luxury group’s perfumes and cosmetics division organic revenue fell by 1 percent to €2.2 billion in the first quarter of 2025, down from 2 percent growth in last year’s fourth quarter. Reported revenue was flat.

L’Oréal sales rose despite the challenging US market. The French cosmetics group reported a 3.5 percent rise in like-for-like first quarter sales on Thursday, due in large part to strong demand for its face creams and fragrances, and reported sales of €11.7 billion in the three months leading up to the end of March.

South Korea’s Amorepacific weighs a faster US manufacturing pivot. Amid a global trade war, the K-beauty cosmetics company is accelerating efforts to bring manufacturing to the US and cease its reliance on major manufacturing hubs in Asia. Amorepacific is also discussing contingency plans with US clients in response to Trump’s levies on China.

Boosted by mass skincare, Beiersdorf beat expectations. The German personal care goods manufacturer reported Tuesday that sales increased 3.6 percent to €2.69 billion, beating analyst expectations by €40 million. Skincare brand Nivea’s sales grew 2.5 percent while Eucerin and Aquaphor jumped 11.4 percent.

Eli Lilly’s new GLP-1 pill posted better-than-expected results. Eli Lilly’s shares jumped 16 percent on Thursday after a trial of diabetic patients found the experimental pill was as effective as Ozempic in lowering weight and blood sugar. Lilly will seek regulatory approvals by the year’s end. US-listed shares of Ozempic-maker Novo Nordisk fell 7 percent.

PEOPLE

Ulta Beauty named a new chief merchandising officer. The beauty retailer announced Thursday that Lauren Brindley will succeed Monica Arnaudo as chief merchandising and digital officer on June 3. She joins Ulta from Revolution Beauty, for which she was chief executive from August 2023.

Shiseido named a new Americas CEO. Following Ron Gee’s resignation from the role, Shiseido’s EMEA region CEO Alberto Noé will step in as interim Americas CEO, the company announced Tuesday. Shiseido Americas’ net sales fell 7 percent in 2024 after Drunk Elephant underperformed.

MEDIA AND TECHNOLOGY

Google illegally monopolised some ad tech markets, a judge ruled. US district judge Leonie Brinkema found on Thursday that the Alphabet Inc.-owned company violated antitrust law in the markets for advertising exchanges and ad servers, the second time in a year Google was found by a court to be an illegal monopolist. Following the ruling, Alphabet shares sank by as much as 3.2 percent.

Temu and Shein slash their digital ads as tariffs will end cheap shipping from China. The fast-fashion retailers are sharply curtailing US digital ad spending in a blow to tech companies like Meta.

The Independents acquired design studio 2x4. The fashion PR giant announced the acquisition of the New York- and Beijing-based studio Thursday, which will bolster the group’s design and brand strategy offerings. 2x4 joins The Independents’ growing portfolio of 18 global agencies.

Compiled by Jessica Kwon.