⚠ The Cyclical & China DependenceModerate threat

For all the durability of its moat, LVMH sells something the world can, in a pinch, do without: discretionary indulgence for the affluent. That makes its demand cyclical, rising and falling with the wealth, confidence, and mood of rich consumers across the globe — and the single largest swing factor in that demand has, for a decade, been China. The Chinese consumer, at home and travelling, became the growth engine of global luxury, and LVMH rode that wave to record revenues. The wave is the risk.

The danger showed itself plainly in 2024 and 2025, when a Chinese economic slowdown, a property crisis, and a more cautious mood among affluent buyers there dragged the whole luxury industry down — and LVMH with it. Group revenue and profit fell for the first time in years: 2025 revenue slipped to roughly eighty-one billion euros and net profit to under eleven billion¹, both down from their 2023 peaks. It was a vivid reminder that even the widest moat does not exempt a company from the cycle of the market it serves.

The China exposure is a concentration risk layered on top of the cyclicality. A very large share of luxury demand — and of its recent growth — has come from Chinese buyers, so a structural change in that market matters enormously: a persistent slowdown, a shift in the government's attitude toward conspicuous consumption, a wave of nationalism favouring domestic brands, or a lasting change in how a younger generation there spends could all weigh on LVMH for years, not quarters.

It is important, though, to size this threat correctly. It is a cyclical and concentration risk, not a moat-destroying one. A downturn cuts LVMH's volumes and dents its earnings, but it does not erode the heritage, the pricing power, or the desirability of the brands — which is why the group stayed hugely profitable through the 2025 soft patch and why its recovery, when demand returns, tends to be swift, as the early signs of stabilizing organic growth in 2026 suggest. The cycle is real and the China dependence is genuine, and both deserve a prominent place in any honest reckoning. But they bruise the moat rather than draining it — the crucial difference between a great business having a bad year and a poor business being found out.