⚠ Rent & Staff Don't FlexLow threat

The owned-boutique model's great weakness is its operating leverage: the costs are largely fixed, so profitability swings hard with sales. Flagship stores sit on the world's priciest streets under long, expensive leases; they are staffed by trained sales and service teams; and none of that cost falls when a downturn empties the store. So when luxury demand softens, an owned-retail model's margins compress faster than a wholesaler's would, because the wholesaler can push inventory risk and store costs onto its retail partners while LVMH bears them directly.

This is the deliberate trade LVMH makes — accepting cyclical cost risk in exchange for total control of price and experience — and in good times it is richly rewarded. But it means the boutique network amplifies the downside in a slump, as the 2024-25 softness showed. It is not a danger to the moat, which the owned retail underpins, but a real driver of earnings volatility that owners should size correctly — recurring operating profit fell 4% on a milder revenue dip in H1 2026¹. Low-to-moderate.