LVMH Deep Dive: Opportunities in the Luxury Market?

Key Takeaways

1. Resilient Growth: LVMH achieved 2% organic revenue growth in H1 2024 despite currency headwinds and weaker demand in key markets.

2. Mixed Segment Performance: Strong results in Fashion and Leather Goods contrast with a 12% revenue decline in Wines and Spirits.

3. Strategic Opportunities: Expanding into emerging markets and enhancing digital channels offer growth potential.

4. Valuation Potential: Current market pullback may be an overreaction; LVMH could benefit as economic conditions improve.

5. Strong Financial Position: Healthy liquidity and manageable debt support ongoing growth and strategic investments.

Table of Contents

1. Company Overview

2. Thesis

3. Fundamental Overview

4. Status Quo

5. Risks and Opportunities

6. Valuation

7. Conclusion

Company Overview

LVMH Moët Hennessy Louis Vuitton SE (LVMH) is a global leader in the luxury sector, headquartered in Paris, France. Formed in 1987 by merging Louis Vuitton, a leading fashion house, with Moët Hennessy, a renowned champagne and cognac producer, LVMH has grown into the world's largest luxury goods company, managing a diverse portfolio of prestigious brands.

LVMH's management comprises a strong team of executives and board members, blending family leadership with industry expertise:

• Bernard Arnault: Chairman and CEO, Arnault is the visionary behind LVMH's growth, focusing on creativity, excellence, and innovation across its brands.

• Delphine Arnault: Executive Committee member, oversees Christian Dior Couture, maintaining its identity and driving growth.

• Stéphane Bianchi: Group Managing Director, heads the Watches and Jewelry business, a key growth area.

• Pietro Beccari: Leads Louis Vuitton, LVMH's flagship brand and a major revenue driver.

• Jean-Jacques Guiony: Chief Financial Officer, directs the financial strategy and operations.

The executive committee includes leaders from each major business group, providing strategic direction aligned with market needs. The executive committee includes leaders from each major business group, providing strategic direction aligned with market needs. LVMH also benefits from high insider ownership, with key insiders actively buying shares at current prices, reflecting strong confidence in the company's future.

1. Wines and Spirits: This segment includes renowned brands like Moët & Chandon, Veuve Clicquot, Hennessy, and Glenmorangie. It focuses on champagne, wines, and spirits production and distribution worldwide. In the first half of 2024, this segment faced lower demand in key markets like China and the U.S., but sustained performance through strong branding and cost management.

2. Fashion and Leather Goods: LVMH’s largest revenue segment includes iconic brands such as Louis Vuitton, Christian Dior, Fendi, Celine, Givenchy, and Loewe. Known for luxury leather goods, fashion, and accessories, this segment has shown resilience through strong brand equity, innovation, and new collection launches.

3. Perfumes and Cosmetics: Comprising brands like Parfums Christian Dior, Guerlain, Givenchy Parfums, and Benefit Cosmetics, this segment capitalizes on prestige and innovation to maintain a strong market presence. Growth has been driven by product and marketing innovations, particularly in Asia and North America.

4. Watches and Jewelry: This segment features luxury watchmakers like TAG Heuer, Hublot, and Zenith, along with jeweler Bulgari. The strategy focuses on brand enhancement through innovation, craftsmanship, and partnerships, achieving resilience amid mixed market trends through selective retail expansion.

5. Selective Retailing: Encompassing Sephora, a leader in prestige beauty retail, and DFS, a major duty-free player, this segment benefits from Sephora’s strong growth in North America and Europe, while DFS faces varied recovery across international tourism markets.

6. Other Activities and Eliminations: Includes smaller ventures such as hospitality, media, and real estate, alongside group-level adjustments. These activities add diversification and stability to LVMH’s portfolio.

LVMH's multi-brand approach allows it to cover diverse segments of the luxury market, from high fashion to specialty retail, catering to a wide range of customer preferences globally. Its decentralized management model empowers individual brands to innovate and remain distinct while benefiting from the strength and scale of the LVMH umbrella.