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Understanding Financial Strength, Risk, and Growth Signals Through the Lens of Leading Fashion Houses
Financials
15 July, 2025
Table of contents
In the dynamic world of fashion and luxury, understanding a company’s financial health is essential for investors, university students, academicians, strategists, and brand executives alike. At the heart of this understanding lies one essential document: the balance sheet.
Whether you're assessing the fiscal strength of a luxury conglomerate like LVMH Moët Hennessy - Louis Vuitton or evaluating an independent fashion house’s viability, reading a balance sheet is non-negotiable. Here's how to decode it effectively.
A balance sheet is a snapshot of a company's financial position at a specific moment in time. It reveals what a company owns (assets), what it owes (liabilities), and the remaining interest held by its shareholders (equity).
The balance sheet equation:
Assets = Liabilities + Equity
The balance sheet serves as a fundamental tool for financial transparency, accountability, and informed decision-making. It is not just an internal tool for management, but also a document of record required by law in most countries.
Company Management: Uses it to assess liquidity, operational efficiency, and funding strategies. It helps guide investment decisions, expansion plans, and cost management.
Investors & Shareholders: Evaluate financial stability, growth potential, and risk exposure before allocating capital.
Lenders & Creditors: Assess creditworthiness, debt capacity, and repayment ability.
Governments & Regulators: Use it for tax assessments, enforcing compliance with corporate laws, and tracking macroeconomic indicators.
Society at Large: Indirectly benefits from responsible corporate financial management that drives employment, taxes, and sustainable practices.
By consolidating all key financial obligations and resources in one place, the balance sheet provides a foundation for financial integrity and public trust - essential for thriving in a global fashion and luxury market.
Evaluating Capital Structure: Understanding how a company is financed - through debt vs. equity - helps assess financial risk.
Measuring Liquidity: It enables a quick check of a company’s ability to meet short-term obligations using the current ratio or quick ratio.
Assessing Operational Efficiency: When compared with other statements, such as the income statement, it reveals how effectively a company utilises its assets.
Supporting Decision-Making: It provides a clear picture for mergers, acquisitions, loans, and performance benchmarking.
By consolidating all key financial obligations and resources in one place, the balance sheet provides a foundation for financial integrity and public trust - essential for thriving in a global fashion and luxury market.
Assets represent the resources a company owns or controls that are expected to bring future economic benefit. According to Harvard Business School Online, assets are key indicators of a company’s operational capacity and investment strategy. They are classified as current or non-current based on liquidity and usage.
Assets are classified as either current or non-current:
| Type | Description | Fashion Example |
|---|---|---|
| Current Assets | Expected to be used within a year | Inventory of seasonal collections, cash reserves, accounts receivable from wholesale buyers |
| Non-Current Assets | Long-term resources | Flagship retail stores, proprietary software, IP such as trademarks |
In luxury, large intangible assets such as brand value and creative IP often carry significant strategic importance - even when not fully captured on the balance sheet.
Liabilities are the company’s financial obligations to outside parties - debts that must be settled over time through asset transfer or services. As outlined by Harvard Business School, understanding liabilities helps assess financial risk and a company's ability to meet its short-term and long-term commitments.
These reflect a company's financial obligations:
| Type | Description | Fashion Example |
|---|---|---|
| Current Liabilities | Due within a year | Payments owed to suppliers, short-term leases |
| Non-Current Liabilities | Due after a year | Long-term loans for store expansion, sustainability investments |
Luxury brands operating on a global scale often hold multi-currency debt or long-term obligations tied to retail leases in key markets like Paris, New York, or Tokyo.
Equity represents the ownership interest in the company. It is the residual claim on assets after liabilities are paid off. Harvard Business School describes equity as a reflection of shareholder investment and retained earnings, which signal how a business reinvests profits to support growth.
Equity represents the residual interest in the assets after deducting liabilities. It includes:
Common stock
Retained earnings
Other reserves
For privately held fashion houses, equity can also indicate how profits are reinvested to build long-term brand value rather than distributed as dividends.
To better understand balance sheet analysis, let’s apply core concepts directly to the FY2024 figures of LVMH, Hermès, and Kering based on key indicators presented in the table below. These KPIs such as total revenue, gross profit, net income, current assets, and equity offer a comprehensive view of each company’s financial health, efficiency, and structure in a comparable format.
| Indicator (€ million) | LVMH (2024) | Hermès (2024) | Kering (2024) |
|---|---|---|---|
| Total Revenue | 84.683 | 15.170 | 17.194 |
| Cost of Sales | 27.918 | 4.511 | 4.513 |
| Gross Profit | 56.765 | 10.660 | 12.681 |
| Operating Income | 18.907 | 6.150 | 2.312 |
| Net Income | 12.550 | 6.432 | 1.227 |
Note: Hermès maintains a net cash position, while Kering’s relatively high debt levels reflect ongoing transformation and acquisitions.
The simplified table now highlights the most relevant indicators for academic and strategic interpretation - such as revenue, gross profit, and equity - based on the official FY2024 reports from LVMH Moët Hennessy - Louis Vuitton, Hermes, and Kering Group. These numbers reflect each company’s financial performance and health, useful for students, researchers, and business analysts studying the luxury sector.
Hermes International SA stands out for its high net income (€6,4 billion) relative to revenue, showing exceptional profitability.
LVMH Moët Hennessy - Louis Vuitton, while the largest in total revenue (€84,7 billion), had lower profit margins compared to Hermes International SA.
Kering Group, though smaller in scale, remains a key player with solid gross profit (€12,7 billion) and growing operating income.
Across the board, current assets and liabilities show how each brand manages liquidity - Hermes International SA again being the most conservative, while LVMH Moët Hennessy - Louis Vuitton balances large operations with stable equity. These figures offer a realistic lens through which to assess fashion brands’ financial strategies and risk levels.
Before diving into finance jargon, ask yourself: Does the company have enough money to pay for what it owes soon? That’s what financial stability really means in simple terms.
Here are three friendly indicators you can check (and how the pros describe them):
This tells us about liquidity. Whether the company can meet its short-term obligations. You can look at:
Current Assets ÷ Current Liabilities
If the number is higher than 1, that's generally good. For example, Hermès has significantly more cash than short-term debts, meaning it’s very stable in the short term. Kering has nearly equal short-term debt and cash, which means it must be cautious.
This refers to the company’s capital structure. Too much borrowing can be risky. Look at:
Total Liabilities ÷ Total Equity
A lower number means the company is less reliant on borrowed money. For instance, Hermès is mostly funded by its own profits and investor equity.
This means looking at efficiency. If a company has lots of assets (like inventory or property), is it using them to generate strong profits?
Hermes International SA is known for operating lean and smart - with fewer stores and less stock, it generates very high profits. LVMH Moët Hennessy - Louis Vuitton, being much larger, needs more inventory and assets to run - but also brings in more revenue. Kering Group’s cash position of €3,5 billion contrasts with €3,5 billion in short-term borrowings, suggesting tighter liquidity conditions. This may raise concerns among lenders and investors if not backed by strong cash flows.
These three basic questions help you understand the brand’s financial health—without needing to be a finance expert!
Example: Let’s imagine a new luxury handbag brand called Aurore Atelier.
It has €10 million in current assets and €4 million in current liabilities - its current ratio is 2,5. That’s very healthy.
Its total liabilities are €3 million and equity is €9 million - debt-to-equity ratio is 0.33, showing it’s conservative with borrowing.
Its total assets are €12 million, and it made €4 million in net income - a sign that it's using its resources efficiently.
So even though it's a smaller company, its balance sheet tells us it's financially strong. €11,6 billion in cash and equivalents against virtually no debt - demonstrating extraordinary liquidity and prudent cash management. This strengthens its ability to weather macroeconomic headwinds or fund expansion without borrowing.
If you're a student or beginner looking at two or more years of data, you can spot patterns by comparing how certain numbers grow or shrink over time.
| Indicator (€ million) | LVMH (2024) | Hermès (2024) | Kering (2024) |
|---|---|---|---|
| Current Assets | 47.471 | 15.476 | 10.623 |
| Total Assets | 149.190 | 23.084 | 43.346 |
| Current Liabilities | 33.696 | 3.629 | 9.592 |
| Equity | 69.287 | 17.334 | 15.730 |
Here are a few simple questions to ask:
That means the company might be borrowing more than it's building up - and that's something to keep an eye on.
This could be a good sign. It may mean the company is saving profits instead of paying them all out (called 'retained earnings') or has received new investment.
If cash is falling but debt is rising, the company may be funding operations or expansions with borrowed money - which isn't always bad, but can be risky if not managed carefully.
Let’s look at our real-world examples:
Hermes International SA: Its equity keeps rising, and its cash stays strong. That suggests long-term thinking and consistent profits.
{{Kering Group: Debt is up, possibly to fund changes or acquisitions. It's a bold move, but needs careful watching.
LVMH Moët Hennessy - Louis Vuitton: Its balance sheet shows steady growth - no big spikes, just solid management.
Looking at financial changes over time, not just at one moment, gives you a much clearer picture of how a brand is evolving.
Think of red flags as clues that something might not be quite right. These signals can help you avoid risky investments or spot brands that might be in trouble.
Here are four big ones to watch for:
If the brand’s accounts receivable (money owed by customers) is increasing too fast, it might mean customers are delaying payments.
Why it matters: Cash flow could suffer - even if the brand looks profitable on paper.
A growing stockpile of unsold clothes, shoes, or accessories might mean the brand misjudged demand.
Why it matters: They may have to discount heavily to sell, which can damage brand image and profits.
Some debt is normal. But if a company relies heavily on loans due within a year, that could be risky.
Why it matters: It might struggle if market conditions tighten (like during a crisis or recession).
If the amount “left for the owners” keeps going down year after year, that’s a concern.
Why it matters: It may reflect past losses or lack of reinvestment into the business.
Real-World Example:
In 2024, Kering Group’s total liabilities (€27,6 billion) were nearly twice as large as its equity (€15,7 billion). That doesn’t mean it’s failing, but it does suggest the company is going through a bold, leveraged transformation that needs to be watched carefully.
Now let’s explore why balance sheets matter not just for spotting problems - but for unlocking opportunities.
As global fashion brands face economic uncertainty, geopolitical risks, and increased demand for sustainable business models, the balance sheet has evolved from a financial snapshot into a strategic compass. According to McKinsey & Company’s 2024 State of Fashion report, resilient brands tend to maintain strong liquidity, low leverage, and the ability to fund innovation through internally generated capital.
In addition, the balance sheet is central to ESG (Environmental, Social, and Governance) alignment. Capital expenditures on sustainability initiatives, real estate decarbonisation, or ethical sourcing must be reflected transparently in non-current assets and liabilities. Regulatory bodies like the European Financial Reporting Advisory Group (EFRAG) increasingly require financial disclosures that link balance sheet items with ESG impact.
In short, a solid balance sheet:
Enables timely investment in digital, circular, and omnichannel transitions
Supports long-term brand equity during downturns
Reduces dependence on volatile capital markets
Signals operational health to rating agencies, shareholders, and regulators
Reading a balance sheet isn't just a technical skill - it’s a strategic one. For stakeholders in fashion and luxury, it offers unparalleled visibility into a brand’s health, risk profile, and capacity for innovation.
The fashion and luxury industries are no longer driven by creative direction alone - data-driven decision-making plays an equally crucial role. As brands scale globally, navigate sustainability mandates, and manage multi-channel operations, the balance sheet remains a non-negotiable tool for alignment, planning, and resilience.
Fashionbi specialises in precise financial data, offering balance sheet indicators and profitability metrics for thousands of fashion, luxury, and beauty brands. Our insights are sourced from verified, trustworthy documents and updated regularly for accuracy and comparability. Whether you’re a student, consultant, entrepreneur, or investor, Fashionbi helps you stay informed with the numbers that matter.
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LVMH: Multi-Year Financial Dashboard
Hermès: Balance Sheet & Profitability Deep Dive
Kering: Growth, Restructuring, and Risks
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