LVMH is the world’s largest and most diversified luxury goods business with 70 brands and a retail network of over 3,300 stores.The Fashion & Leather Goods division generates over half of profits and includes Louis Vuitton.Luxury demand has positive drivers but is currently seeing a slowdown in Chinese sales.      

Bernard Arnault is France’s richest man and is the Chairman and CEO of the French luxury goods giant LVMH.Mr Arnault’s family has a majority of the voting rights in LVMH despite owning only a 46.6% stake.

This structure appears to have worked out well for investors in LVMH with Mr Arnault having grown the company successfully. LVMH is currently the only luxury goods firm that is present in all sectors of the luxury market.

LVMH revenue split in 2014

55bf8d1287e90LVMH.png

LVMh’s diversification helps reduce the exposure to any one brand and therefore makes it less exposed to a shift in fashion. This is important given the mixed fortunes of companies like Mulberry, Prada, Coach and Michael Kors.

The long-term investment case for luxury goods is based on the resilient nature of the brands and growing demand.  In the Wines & Spirits division the allure of Hennessy, KRUG, Moet & Chandon and Dom Perignon is unlikely to fade.  

Growing demand is mainly driven by Asia but across the world the “rich are getting richer.”  The luxury goods can also be very profitable as customers focus on prestige and brand quality rather than the price. 

LVMH share price

The €86bn Luxury goods group has delivered:55bf8d456b16dLVMH_2.png

LVMH’s profit drivers

In terms of profits and the Fashion & Leather Goods division generated 56% of LVMH’s profits in the first half of 2015.  The Wines & Spirits division contributed 16.3% of profits and then Selective Retailing came in at 14.5%.

The Fashion & Leather Goods division made up only 35.5% of first half revenue and so has strong profit margins.  It is the key division that investors focus on for the sales performance and the reception for brands at fashion shows.  

55bf8d6034d78LVMH_3.png

The weakness of the euro from early 2015 has served to bolster revenue and profits in euro terms.In the first half of 2015 only 22% of revenue was invoiced in euros while 31% was invoiced in US dollars and 8% in Hong Kong dollars.

Recent trading: Organic revenue growth picks up

Turning to…

Unlock the rest of this article with a 14 day trial

Already have an account?
Login here