⚠ Fixed Costs & Input InflationLow threat

The enviable margin rests on a price the company controls, but the cost side is not entirely in its hands. LVMH's model is heavy with fixed costs — flagship boutiques on the world's priciest streets, large sales and craftsmanship workforces, marketing and events — and those costs do not fall when sales soften, so a downturn squeezes the margin from below even as pricing holds it up. Input inflation adds to the pressure: the finest leathers, gold, gemstones, and skilled artisan labour are scarce and getting dearer, and rent and wage inflation in luxury's key cities is real.

None of this threatens the moat — the operating margin held in the low twenties even through the 2024-25 slump, which is precisely the point — but it caps how high the margin can go and makes it more cyclical than a pure pricing story would suggest. It is a modest, ever-present drag rather than a danger to the franchise, and a reminder that even a business that sets its own prices does not set its own costs — recurring operating profit slipped 4% in H1 2026 partly on exactly this¹.