L'Oréal Overtakes LVMH to Become Paris' Top Company by Market Capitalization as Consumers Choose Lipstick Over Luxury Bags [Luxury Price Story]

[Financial News] French beauty group L'Oréal has overtaken the world's leading luxury conglomerate, LVMH Moët Hennessy Louis Vuitton (LVMH), to become the largest company by market capitalization on the Paris stock exchange.
According to Newsis and Agence France-Presse (AFP) on the 16th, L'Oréal's market capitalization on the Paris stock exchange stood at approximately €203 billion (about 319.9 trillion won) at the close of trading on the 15th local time, surpassing LVMH's approximately €201 billion (316.8 trillion won). This marked the first time since 2017 that a listed company other than a luxury company ranked first by market capitalization at the close of trading on the Paris stock exchange.
L'Oréal's share price fell 0.78% that day, but LVMH shares dropped more than 2%, reversing their market-cap rankings. Since the beginning of the year, L'Oréal's share price has risen by about 5%, while LVMH's has plunged by more than 35%.
Global luxury companies that enjoyed a boom during the pandemic have experienced slowing performance in recent years. The downturn has been driven by China's economic slowdown, worsening conditions in the Middle East, and growing consumer dissatisfaction with repeated price increases.
L'Oréal's rebound is being attributed in part to the so-called “lipstick effect.” Amid an economic downturn, consumers are turning away from expensive luxury goods such as bags and shoes and toward relatively affordable indulgences such as cosmetics.
Nick Anderson, an analyst at Berenberg, assessed, “As people can no longer afford to buy expensive luxury goods, they are enjoying small luxuries such as lipstick to lift their spirits.”
Global consulting firm Bain estimates that about 60 million middle-class customers stopped buying luxury goods over the past three years. That figure represents approximately 15% of all luxury consumers. Analysts also say that Chinese consumers, once major spenders in the luxury market, have closed their wallets amid the downturn in China's market.
Anderson forecast that, apart from a small number of ultra-wealthy consumers, LVMH is suffering from a “structural lack of demand.” In addition to the economic slowdown in China, once the luxury industry's key growth engine, potential tax increases in Europe, inflation, and job insecurity caused by artificial intelligence (AI) are weighing on consumer sentiment, he said.
LVMH rose to become Europe's largest company by market capitalization in 2021, benefiting from the pandemic boom. However, after another share-price decline that day, it was also pushed out of Europe's top 10 companies by market capitalization for the first time since 2017.
Meanwhile, LVMH Chairman Bernard Arnault lost his position as Europe's richest person to Amancio Ortega, the founder of fashion retailer Zara, in Forbes' real-time billionaire rankings.
[email protected] Kim Soo-yeon Reporter