Luxury-goods giant LVMH is facing a major business challenge after losing more than $167 billion in market value this year, according to Reuters Breakingviews.

The company, whose brands include Louis Vuitton, Dior, Moët & Chandon and TAG Heuer, has been affected by weaker demand in key markets, particularly China.

LVMH’s Fashion and Leather Goods division accounts for roughly three-quarters of the group’s recurring operating profit, with Louis Vuitton making up a particularly large share.

The company’s heavy dependence on luxury shoppers in Asia has become a weakness as Chinese consumers have reduced spending.

The broader luxury market has also changed. Consumers in China are increasingly showing interest in local brands and in categories such as beauty and jewellery, while demand for expensive leather goods has weakened.

LVMH’s competitors have experienced similar pressure, although companies such as L’Oréal and Richemont have performed better in some areas.

LVMH is responding by focusing on product desirability, store improvements and creative changes rather than simply cutting prices.

The company is also looking at smaller investments that could help it understand changing consumer preferences in markets such as China.

The challenge for LVMH is that its enormous size makes a quick turnaround difficult.

The company must rebuild demand for its major brands while reducing its dependence on a single major business division and restoring its appeal among Chinese consumers.

Source: Reuters Breakingviews