Ivan Kroshnyi: Robert bot
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A Powerful Giant and Myriads of Fashion Houses:Inflation-Proof Growth

LVMH (Moët Hennessy Louis Vuitton), the world’s leader in luxury products, showed €21 billion in revenue in Q1 2023, +17% compared to the same period in 2022. LVMH brings together 75 premium-level brands, with €79.2 billion in revenue in 2022, €14.1 billion in net income, and an operating margin of 26.6%. The retail network includes 5,664 stores worldwide with ~196k employees. In the face of uncertainties, the year started off excellently. The company is listed on the French stock exchange, but you can invest in it via U.S. ADRs. LVMH has a market cap of €421 billion, with its shares rising 20% since the beginning of the year.

Revenue per location
France 7%
Europe (excluding France) 14%
Japan 7%
Asia (excluding Japan) 36%
USA 23%
Other 13%

Growth per location (YoY)
USA +8%
Japan +34%
Asia (excluding Japan) +14%
Europe +24%

Revenue per business group (YoY)
Fashion and leather products (growth: Louis Vuitton, Christian Dior, Celine, Loewe, Fendi, Loro Piana, Rimowa, Marc Jacobs, Berluti) ► €10.73 billion (+18%)
Watches and jewelry (growth: Tiffany & Co, Lock, Bvlgari, Chaumet, Fred, TAG Heuer, Hublot, Zenith) ► €2.59 billion (+11%)
Perfumes and cosmetics (growth: Sauvage, Miss Dior and J’Adore Christian Dior, Aqua Allegoria Guerlain, Gentleman Society Givenchy, The Porefessional Benefit, Fenty Beauty) ► €2.11 billion (+11%)
Wines and spirits (growth: Hennessy, Château d’Esclans, Glenmorangie, Belvedere, champagnes) ► €1.69 billion (+3%)
Selective retailing (growth: Sephora, DFS, Le Bon Marché) ► €3.96 billion (+30%)

Advantages of LVMH at its core

  • It boasts a portfolio of culturally vibrant brands with exceptional pricing power, which can convey a permanent price increase to its customers.
  • It owns the cosmetics retail chain Sephora. And if there is something that stands out as a hero of the post-pandemic time, it’s definitely cosmetics. This category is one of the few in retail that has retained buyers and momentum built up in recent years (in general, when customers face uncertainty, they opt for bigger brands.)
  • It’s in a profitable cycle: consumers are spending more on travel at all levels, and it works hand in hand with high-end fashion and cosmetics.
  • It rolls out special collections under different brands and runs effective social media campaigns, plus long-term celebrity partnerships: brands remain relevant to young customers through the “limited-edition” factor.
  • It can spend when others can’t. With €79 billion in revenue last year, marketing spend was €9.5 billion or 12% of revenue—an insane amount if we’re talking about emotions and investment.
  • Analysts predict long-term revenue growth and EPS growth driven by pricing and reduced operating costs as brand innovation continues, and scale allows for a hefty marketing budget.
  • LVMH’s commitment to selling products at full price, vertical integration, and customer affinity for leading brands keep operating margins above 26% and growing. According to TD Cowen, the group’s operating margins will reach 27.7% in 2023 and rise to 28.3% in 2024.
  • In an inflationary environment, buyers get attracted by luxury and deep value, and they seek value in both cases. Luxury brands demand higher prices on and after purchase.
  • Scale value: LVMH takes first place in its niche and is well capitalized. Its net debt-to-EBITA ratio is below one.
  • LVMH is a winner not only because it’s the top luxury brand. It’s an example of how to be the best in everything you do. No matter how harsh it sounds, the reality of the numbers is as follows: as long as there is money and “addicted” people, companies like LVMH will keep growing.
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