LVMH has given up almost all of its share price gains from a pandemic-era industry boom that made it Europe’s first $500bn company, as geopolitical turmoil quashes “the feelgood factor” on which high-end brands depend. The market capitalisation of the Paris-listed group behind Dior, Louis Vuitton and Veuve Clicquot has more than halved to €213bn from its 2023 peak. That decline has put LVMH within touching distance of its valuation in January 2020, shortly before the onset of the Covid-19 pandemic, which catalysed a historic surge in luxury spending.

The share price fall has come despite LVMH last year reporting profits from continuing operations of €17.8bn — more than 50 per cent higher than in 2019. The luxury downturn began around three years ago as inflation squeezed middle-class shoppers, known as “aspirational” luxury consumers. The decline has been exacerbated by US trade disputes and war in the Middle East.

Bain estimates that 60mn mostly ‘aspirational’ consumers have stopped buying over the past three years. Flavio Cereda, fund manager at GAM, said the problem for LVMH was that the company has become a way for investors to bet on the spending of the aspirational consumer. Succession planning at LVMH has become increasingly important for investors, according to Christopher Rossbach, chief investment officer at LVMH shareholder J Stern & Co. Arnault, 77, is grooming his five children to one day succeed him.

However, in April the family patriarch batted away questions over succession, telling shareholders “we’ll talk about this all again in seven or eight years”. Brands like Hermès, which have a more upmarket clientele, have instead outperformed. Bain estimates that 60mn mostly “aspirational” consumers — roughly 15 per cent of the total luxury customer base — have stopped buying over the past three years.

Luxury brands themselves arguably did little to retain them by raising prices on many goods by between 50 per cent and 70 per cent compared with 2019 levels. Cereda said these shoppers would typically buy when there was a “feelgood factor” but middle-class consumers were not in a good place financially. “We’ve been waiting for this to change, [but] so far there have only been false starts,” he said. The luxury industry has also been held back by sluggish demand in China, which powered the industry’s growth for the past decade.

Chinese consumers have become more reticent to spend as property values have tumbled and the stock market has underperformed. The pain has not been shared equally across the industry. Brands like Hermès and Brunello Cucinelli, which have a more upmarket clientele, have outperformed, while houses that were already in need of a turnaround, such as Gucci-owner Kering and Burberry, have been among the worst performers.

The sector’s standout performer through the downturn has been Swiss jewellery group Richemont. A 28 per cent surge in its shares over the past six months has propelled the market value of the group behind Cartier and Van Cleef & Arpels above €100bn. Demand has also been strong at LVMH jewellery brands Tiffany and Bvlgari.