LVMH's business is doing better, but not thanks to fashion The real heavy lifting was done by watches and jewelry

Yesterday afternoon, LVMH's financial results for the first half of 2026 were released. The trade press and the company itself immediately seized on 1% growth, proclaiming the end of the luxury crisis — but the picture is more complex than that. Even though official communications speak of a boom in customers at Dior, for example, the first six months of the year actually closed with consolidated revenue of €38.644 billion, representing a 3% decline compared to €39.810 billion in the same period of 2025.

Sales growth calculated by stripping out currency fluctuations and the divestiture of DFS duty-free stores in China — so as to see only how much more or less merchandise was actually sold — came in at 2%. The strengthening of the euro against other currencies reduced the euro value of overseas sales by around 5%, shaving off a further 1%. Profit generated by the group's ordinary activities came to €8.691 billion, down 4% from €9.012 billion in the first half of 2025.

Despite this, for every €100 in sales the company continued to earn roughly the same amount (€22.5 versus €22.3 the previous year), and as a result the Group's net profit remained virtually unchanged at €5.697 billion. After deducting operating costs and capital expenditure, the group's free cash flow stands at €4.100 billion, a slight increase from €4.032 billion last year. But what role did the Fashion division play in all this?

A luxury performance that neither impresses nor alarms

The all-important Fashion and Leather Goods segment, which still accounts for roughly 47% of the Group's revenue, deserves the closest scrutiny. Revenue fell to €18.146 billion from €19.115 billion in the first half of 2025: looking at the raw figures on the balance sheet, divisional revenue dropped 5%, but once currency effects are stripped out the decline narrows to just -1%. Recurring operating profit, however, fell 7%, dropping from €6.636 billion to €6.195 billion.

After stripping out taxes, interest and non-production-related costs, the division's earnings fell 0.6%, meaning that in absolute terms the segment did not grow — it generated lower revenues and, above all, lower operating profit. The 7% drop in profit was steeper than the 5% decline in sales, which means the division earned less on every euro of merchandise sold.

Currency movements weighed heavily on this result, but even setting them aside, profit did not improve. The share of revenue generated through direct retail remained around 95%, with little "leakage," yet this did not prevent an absolute decline in the numbers. These are not catastrophic figures, but drilling down to pure fashion — and acknowledging that margins remain extremely high — the division is still in slight retreat.

So where are the profits coming from?

Jewellery and watches were the group's real winning horses. Driven by Tiffany&Co. and Bvlgari, sales rose from €5.090 billion last year to €5.225 billion. In the official figures, that represents a 3% increase. Strip out currency effects and the impact of investments, disposals or acquisitions, however, and organic growth was 9%. Profit from ordinary activities also rose 9%, and for every €100 in sales, LVMH's earnings climbed from €15 to €16. This means not only did they sell more, they also earned more on each sale — with profit growth at least matching (and in fact slightly outpacing) the increase in underlying sales.

The rest of the portfolio showed more mixed trends. The Wines and Spirits division closed with revenue of €2.598 billion, broadly stable compared to last year, with growth almost exactly offsetting the drag from exchange rates — which left the division where it already was. That is a reasonable outcome given that this division is typically the group's weakest performer. Here too, both profits and margins rose — by 11% and 2.4% respectively — so it is fair to say the spirits business is in stable health. Things went less well for the beauty and fragrance segment, which was actually flat but registered an official decline of 4%. Even so, despite a slight 2% dip in earnings, the margin improved by 0.2%, limiting the impact of the sales decline.

Finally, in the area of selective retailing — including Sephora — sales nominally fell 2%, but once currency effects and the disposal of the DFS chain in China are accounted for, there was actually 5% growth. In practice, the official figures look negative because a stronger euro and the divestiture reduced the overall total, but the underlying business grew. Earnings and margins also saw a slight improvement.

So was it a good result or a bad one?

From the perspective of the balance sheet and cash on hand, the level of net debt — calculated by subtracting already available liquid assets — rose to €8.245 billion from €6.857 billion at end-2025. The ratio of this debt to the group's equity moved from 9.9% to 11.8%, which is nonetheless a low and manageable level. Particularly so when one considers that LVMH's net equity actually increased, reaching €69.694 billion. Cash generated by ordinary activities came in at around €7.647 billion — a decline — while capital expenditure on stores, factories and other internal projects also fell.

Ultimately, the cash remaining after investments and fixed costs such as rents and the like is also slightly up. On balance, then, despite an unfavourable currency environment and an absolute decline in its core business segment, LVMH is still holding its own. The fact that the Fashion & Leather Goods division actually lost some ground should raise a degree of concern — and no doubt does, at least internally — though it is more of a slow drip than a haemorrhage. Portfolio diversification has helped here, with the other divisions acting as a kind of safety net that offset the losses.

Yet the crux of the problem remains: everyone knows that to return to the extraordinary growth rates of the past decade, sales in the Fashion & Leather Goods division would need to be reignited — a division that, at first glance, appears to have hit a kind of ceiling it cannot break through. The real question that lingers, therefore, is whether this sales ceiling is a structural reality, inevitable for anyone, and one that LVMH has simply been the first to reach — or whether there are in fact ways to break through that ceiling and grow the business as it once did.