Luxury goods conglomerate LVMH is compelled to escalate its product prices in view of duties, yet exemptions are granted for these specified items.
The French luxury conglomerate LVMH has announced its intention to increase the prices of its premium goods by two to three percent to counterbalance the effects of President Donald Trump's tariffs. However, the firm has conceded that it will not raise the prices of two key products, Cognac and low-priced beauty products, due to financial constraints.
During a parliamentary hearing on Wednesday, LVMH's chief financial officer, Cécile Cabanis, stated that price rises for these two items would be impractical, as reported by Reuters. Cabanis added that "the ability to increase prices for these two products is not viable."
On the other hand, luxury items such as high-end jewelry may withstand price hikes, according to Stéphane Bianchi, LVMH's deputy CEO. Bianchi asserted that customers of such luxury items could likely absorb the higher costs.
LVMH has experienced a series of challenging quarters, particularly in its alcohol sales. In the last quarter, the company's Cognac and spirits division reported a 17 percent decrease in revenue compared to the previous year. Moreover, sales of Cognac and spirits dropped by 14 percent in 2024 compared to 2023, and champagne sales experienced a 15 percent decline in the first half of 2024.
Factors leading to this weak demand include "sluggish demand for Cognac in the United States and China" and "uncertainties regarding trade policy," as noted in the company's report. The slump in Cognac sales is a part of a broader global slowdown in luxury alcohol sales, aggravated by economic uncertainty and shifting consumer preferences.
In response to the tariffs, LVMH announced in April that it would transfer a larger part of its production from Europe to the US to minimize the risk of tariffs. However, on April 9, Trump admitted a 90-day postponement for the enactment of additional tariffs to enable trade negotiations. Some of Trump's tariffs have since been blocked by the US Court of International Trade. Yet, the specific measures mandated by the government to address this decision remain unclear. The US Department of Justice has appealed the court's ruling.
LVMH representatives were unavailable for comment regarding the situation.
What about the potential impact of increased technology on Cognac production at LVMH?Given the financial constraints, it seems unlikely that the firm would consider adopting advanced technology for Cognac production due to its impracticality.
