LVMH – The Global Luxury Goods Leader

Feel free to reach out to PSG Wealth Manager  Dawid Botha  directly.

LVMH (Louis Vuitton Moët Hennesy) has a portfolio comprising 75 of the most established and sought-after luxury goods houses in the world – including Louis Vuitton, Christian Dior, Tiffany, Bulgari, Hublot, Tag Heuer, Moët & Chandon, Veuve Clicquot and Hennessy. Listed in Paris, LVMH is controlled by the French Arnault family. The parent company provides the resources and support to the various luxury goods houses to design, manufacture and sell their creations around the world. This ensures each brand’s unique identity stays intact while growth and profitability are boosted through vertical integration and synergies in various business functions.

LVMH’s brands are difficult to replace and are centuries old in some cases. The world-class craftsmanship and materials used in the manufacturing process ensure superior quality products.

Exclusivity and prestige are maintained by limiting the supply of products and keeping selling prices high. The above factors often mean an increase in the demand for a product despite the price rising at the same time. As a result, LVMH benefits from greater revenues driven by both increased sales volumes and price adjustments, leading to enhanced profit margins. This approach allows LVMH to strengthen their market position while maximising profitability.

Apart from various sales channels being used, LVMH also continues to expand its network of retail outlets worldwide. Over the last 12 months, the number of stores increased by 8% to 6 194.

LVMH’s sales are less sensitive for economic cycles than those of general consumer product companies. This may be due to the fact that the super-rich constitute a large percentage of LVMH’s clientele, compared with so-called aspiring clients who are more price sensitive. Historically, luxury goods sales have shown robust growth, and research by Baine & Co. suggests that sales will increase by between 4% and 8% per annum from now to 2030.

LVMH’s operations are split into five different segments, which earned about €42 billion in revenue in the first six months of 2024.

The distribution of revenue and operational profit shows the Fashion and Leather Goods segment to be the biggest and most profitable part of the business. Healthy growth, with high margins, suggests that strategically LVMH is positioned appropriately.

Geographically, LVMH is well diversified and 39% of revenue comes from Asia, 25% from the US, 24% from Europe and 12% from other parts of the world. Weaker sales for the year to date, especially in China, have caused the share price to decline substantially.

LVMH Share Price

LVMH is currently trading at a price-earnings multiple of 22 and offering a dividend return of 2.1%. Although not extremely inexpensive, the share price is below the average valuation levels of the last five years. The balance sheet is strong, with net debt levels at just over €12 billion. Debt levels are low compared to the free cash flow of €13 billion for the last 12 months and the share’s market value.

For quite some time, LVMH has been delivering good results for clients with exposure to this share, and our analysis shows that the current share price weakness represents a good buying opportunity for investors. A financial adviser will be able to provide advice on the best way to incorporate LVMH shares with a well-diversified investment portfolio taking account of the investor’s financial needs and goals.