Vuitton Knows Fashion Is a Money Pit—and Keeps Throwing Money in It

It’s been a banner year for clothing at Louis Vuitton. Shoppers queuing for a streetwear collection developed with the cult New York brand Supreme; red-carpet appearances by actresses Michelle Williams and Isabelle Huppert wearing the brand; runway shows by star designer Nicolas Ghesquière at dramatic venues including the Louvre and the Miho Museum in Japan. All of this has pushed Louis Vuitton’s apparel business into the spotlight. The brand also is enjoying a blast of media exposure as France’s new first lady, Brigitte Macron, wears Vuitton at almost all her public appearances. “Ready-to-wear is our fastest-growing category,” says Michael Burke, Vuitton’s chief executive officer.

But don’t expect Vuitton to shift away from its iconic monogrammed handbags. There’s a simple reason: High-end clothes are famously unprofitable. The expense of producing collections, staging shows, and displaying apparel in boutiques wipes out the clothing’s potential profit, says luxury analyst Luca Solca of Exane BNP Paribas. He estimates Vuitton loses more than €100 million ($118.1 million) a year on ready-to-wear, which generates less than €450 million of the brand’s $8 billion to $9 billion in annual sales.