Vinyl is not lossless. Recording engineers had to boost certain frequencies just to get an LP to sound reasonably close to the original tape recording. Think about it: As the needle follows the groove toward the middle of a record, the frequency response drops substantially because the speed at which the vinyl passes under the needle gets slower (the disc rotates at a constant speed, but the length of the groove for each rotation gets shorter and shorter, the bumps for the same frequencies have to get closer together). People making LPs had to take this into account, so you had to avoid putting music with a lot of high frequencies toward the center of the record.
In the LP era, serious audiophiles bought reel-to-reel decks.
That said, low bitrate digital recordings are definitely worse than vinyl. Above a certain bitrate, though, most people can't hear the difference compared to a CD, which is a lossless, uncompressed recording. Definitely not on consumer-grade equipment. It's not unlike JPEG vs uncompressed TIFF.
I went to a high end consumer audio show recently, and almost all the exhibitors were demonstrating their equipment using vinyl records as source, not digital. I doubt audiophiles would drop six figures on a second rate sound system.
Essentially, people who prefer vinyl prefer the way it distorts sound, whether they realize that's what it is or not.
There are also a lot of psychological and subjective factors at work in the high end audio business. When you pay a high price for something, research shows that you will believe it is better than if you paid a much lower price for the exact same thing. The type market is not immune to this, either.
We human beings are not as rational as we think we are, but we excel at rationalization.