LVMH Moët Hennessy - Louis Vuitton, Société Européenne

Business Description

LVMH Moët Hennessy - Louis Vuitton, Société Européenne operates as a luxury goods company worldwide. The company offers champagnes, wines, and spirits under the Clos des Lambrays, Château d'Yquem, Dom Pérignon, Ruinart, Moët & Chandon, Hennessy, Veuve Clicquot, Ardbeg, Château Cheval Blanc, Glenmorangie, Krug, Mercier, Chandon, Cape Mentelle, Newton Vineyard, Cloudy Bay, Belvedere, Terrazas de los Andes, Bodega Numanthia, Cheval des Andes, Woodinville, Ao Yun, Clos19, and Volcan de mi Tierra brands. It also provides fashion and leather products under the Berluti, Celine, Christian Dior, Emilio Pucci, FENDI, Givenchy, Kenzo, Loewe, Loro Piana, Louis Vuitton, Marc Jacobs, Moynat, Patou, and RIMOWA brands. In addition, the company offers perfumes and cosmetics under the Acqua di Parma, Benefit Cosmetics, Cha Ling, Fenty Beauty by Rihanna, Fresh, Givenchy Parfums, Guerlain, KVD Beauty, Kenzo Parfums, Maison Francis Kurkdjian, Make Up For Ever, Marc Jacobs Beauty, Officine Universelle Buly, Parfums Christian Dior, and Perfumes Loewe brands; watches and jewelry under the Bulgari, Chaumet, Fred, Hublot, Repossi, TAG Heuer, Tiffany & Co., and Zenith brands; and custom-designed yachts under the Feadship brand name, as well as designs and builds luxury yachts under the Royal Van Lent brand. Further, it provides daily newspapers under the Les Échos brand; Belmond, a luxury tourism service; home other activities under the Belmond, Cheval Blanc, Connaissance des Arts, Cova, Investir, Jardin d'Acclimatation, La Samaritaine, Le Parisien, and Radio Classique brands; and selective retailing products under the DFS, La Grande Epicerie de Paris, Le Bon Marché Rive Gauche, Sephora, and Starboard Cruise Services brands, as well as operates Jardin d'Acclimatation, a leisure and amusement park. The company operates 5,556 stores. LVMH Moët Hennessy - Louis Vuitton, Société Européenne was incorporated in 1923 and is headquartered in Paris, France.

What's the mission of the company?

“Our success is only worthwhile if it is also virtuous” Success can only last if it is fair. And if it benefits everyone, then it will be even greater. What’s the point of inspiring dreams with magnificent products if they don’t meet the highest social and environmental standards? We apply those standards for the benefit of our employees and our customers of course, for our stakeholders as well, but above all for our future.” Bernard Arnault

2023 Objectives to further increase LVMH's global leadership position:

1. Confidence: continue growth momentum of the company and increase their desirability.
2. Creativity and excellence: focus on creativity, distribution and quality of our products with their core values always in mind.
3. Digitalisation: enrich customer's experience online and in stores.
4. Commitment: preserve the environment and corporate responsibilities.
5. Vigilance: maintain vigilance within current economic and geopolitical context.
6. Entrepreneurial spirit.

LIFE 360: LVMH environmental strategy for new luxury:

1. Biodiversity: 2030 -> 5 millions hectares of flora and fauna preserved.
2. Climate:
   1. 2026 -> 50% reduction in energy- related greenhouse gas (GHG) emissions.
   2. 2030 -> 55% reduction and/or avoidance of Scope 3 GHG emissions per unit of added value.
3. Create circularity: 2030 -> 100% of new products covered by a sustainable design approach.
4. Traceability: 2030 -> 100% of strategic chains covered by a dedicated traceability system.

Macro Analysis and Trends

LVMH operates in the luxury goods industry. This industry is characterized by high-end products that are often handmade and of the highest quality. Luxury goods are typically associated with status and exclusivity, and they are often seen as a way to express one's personal style.

The luxury goods industry is a global industry, with markets in all major regions of the world. The largest players are LVMH, Kering (which includes brands such as Bottega Veneta, Gucci, Saint Laurent), Richemont, Chanel, Burberry, Hermès, Moncler, and Prada.

The luxury goods industry is linked to macroeconomic factors such as economic growth, exchange rates, inflation, interest rates, political stability, and technological progress. Typically, growing economies, favourable exchange rates, low interest rates, and political stability positively impact the luxury sector.

However, the luxury goods industry has shown resilience in periods of economic downturns, and it is expected to deliver sustained growth in 2023, as high inflation and interest rates have a weaker impact on wealthy shoppers’ behaviour. To protect their image, luxury brand manufacturers favour high inventory levels over offering discounts. So far, inelastic demand has allowed them to pass on higher costs to customers, thus increasing their margins.

The industry has experienced significant growth in recent years, and it is expected to continue to grow in the coming years. Looking ahead, this growth will be driven by a number of macro trends:

1.      The growth of the middle class in emerging markets: The growth of the middle class in emerging markets is one of the most important trends in the global economy. This trend is driving demand for luxury goods in emerging markets. Despite a disappointing first half of 2023, China still represents the largest emerging market for luxury goods its economy is expected to grow by 5.2% in 2023.

2.      Generational trends: Millennials are increasingly becoming the target market for luxury goods brands. This is because millennials have more disposable income than previous generations, and they are more likely to spend money on luxury goods. Additionally, “Gen Z” are expected to represent one-third of the market by 2030 and their spending is set to grow three times faster than for other generations until 2030.

3.      The growth of online shopping: The growth of online shopping is another important trend that is impacting the luxury goods industry. Online shopping is making it easier for consumers to buy luxury goods from around the world.

4.      The demand for sustainable luxury goods: There is a growing demand for sustainable luxury goods. This is because consumers are becoming more aware of the environmental impact of luxury goods production.

Key Professionals

Name	Title
Arnault, Bernard	Chairman & CEO
Guiony, Jean-Jacques	Chief Financial Officer
Kuhn, Bernard	General Counsel
Bouillonnec, Yann	Vice President of Sales
Gaemperle, Chantal	Group Executive Vice President of Human Resources & Synergies
Arnault, Antoine	Group Chief Image & Environment Officer and Director
Arnault, Frederic	Chief Executive Officer of TAG Heuer
Bazire, Nicolas	Senior VP of Development & Acquisitions and Director
Beaufils, Benjamin	President of North American Operations
Belloni, Antonio	Group MD & Director
Bianchi, Stephane	Head of LVHM's Watch & Jewelry Unit
Das, Ipsita	Managing Director of India
de Lapuente, Christopher	Chairman & CEO of Selective Retailing Division
Guerra, Andrea	Head of Hospitality & Restaurant Business
Mukherji, Shantanu	Managing Director od L Catterton
Rogers, Ian	Chief Digital Officer
Voisin, Jean-Baptiste	Chief Strategy Officer
Beccari, Pietro	Chairman & CEO of Louis Vuitton
Boillot, Laurent	CEO & President of Guerlain
Brocart, Sophie	Chief Executive Officer of Jean Patou
Jamet, Marc-Antoine	General Secretary
Schaus, Philippe Paul Auguste	Chief Executive Officer of Moët Hennessy - Wines & Spirits Division
Toledano, Sidney	Chairman and CEO of the Fashion Group
Hollis, Christopher	Director of Financial Communications
Stalla-Bourdillon, Bertrand	Group Vice President of Retail Development

Board Members

Name	Title	Type	Tenure
			Start date	End date
Arnault, Bernard	Chairman & CEO	Internal	1988	Present
Arnault, Antoine	Group Chief Image & Environment Officer and Director	Internal	2006	Present
Bazire, Nicolas	Senior VP of Development & Acquisitions and Director	Internal	1999	Present
Belloni, Antonio	Group MD & Director	Internal	2002	Present
Beccari, Pietro	Chairman & CEO of Louis Vuitton	Internal	2018	Present
Toledano, Sidney	Chairman and CEO of the Fashion Group	Internal	2018	Present
de Silguy, Yves-Thibault	Independent Director	External	2009	Present
Gaymard, Clara	Independent Director	External	2016	Present
Valla, Natacha	Independent Director	External	2020	Present
de Croisset, Charles	Lead Independent Director	External	2008	Present
Arthus-Bertrand, Yann	Member of Advisory Board	External	2019	Present
Aumont, Dominique	Employees Representing Director	External	2020	Present
Belloeil-Melkin, Marie-Véronique	Employees Representative Director	External	2020	Present
Chassat, Sophie	Independent Director	External	2018	Present
de Chalon, Marie-Laure Sauty	Independent Director	External	2014	Present
Della Valle, Diego	Member of Advisory Board	External	2002	Present
Gancia, Delphine Arnault	Director	External	2020	Present
Kravis L.L.D., Marie- Josée	Independent Director	External	2011	Present
Mignon, Laurent	Independent Director	External	2023	Present
Powell KCMG, Charles David	Member of Advisory Board	External	2020	Present
Védrine, M. Hubert	Independent Director	External	2004	Present

Committees

Committee	Name	Title
Audit Committee	Gaymard, Clara	Independent Director
	de Chalon, Marie-Laure S.	Independent Director
	de Croisset, Charles	Lead Independent Director
	de Silguy, Yves-Thibault	Independent Director
Compensation Committee	Valla, Natacha	Independent Director
	Chassat, Sophie	Independent Director
	de Croisset, Charles	Lead Independent Director
	Kravis, Marie- J.	Independent Director
Corporate Governance Committee	Valla, Natacha	Independent Director
	Chassat, Sophie	Independent Director
	de Croisset, Charles	Lead Independent Director
	Kravis, Marie- J.	Independent Director
Other Committee	de Silguy, Yves-Thibault	Independent Director
	de Chalon, Marie-Laure S.	Independent Director
	Gancia, Delphine A.	Director
	Védrine, M. H.	Independent Director

ESG - Materiality Matrix

Particulars	Wines and Spirits	Fashion andLeather Goods	Perfumes and Cosmetics	Watches and Jewelry	SelectiveRetailing
State of energy resources and climate change	-Grape growing and yield -Packaging production -Distillation -Transportation of products -Soil erosion	-Store lighting, air conditioning and location -Transportation of products and carbon taxes -Production of resources needed to manufacture products: -Plant fibers used for textiles (cotton, etc.) Leather, including exotic leather, Fur, Wool -Customer expectations in relation to more sustainable products -Renewable energy costs	-Packaging production -Store lighting, air conditioning and location -Transportation of products and carbon taxes -Customer expectations in relation to more sustainable products -Renewable energy costs	-Store lighting, air conditioning and location -Renewable energy costs	-Store lighting, air conditioning and location -Transportation of products -Renewable energy costs
Impact on water resources	-Water consumption (vineyard irrigation in Australia, New Zealand, Argentina and California) -Production of effluents containing organic matter during winemaking and distillation	-Water consumption (crocodilian farms and tanneries) -Production Ofeffluents containing organic matter	- Water consumption (production and transformation of raw materials)	-Water consumption during the extraction of mineral resources needed to manufacture products -Production of effluents containing mineral matter
Impact on ecosystems (including deforestation and desertification) and depletion of natural resources	-Production of plant resources needed for other production processes (grape vines, barley, rye, etc.)' - Protecting biodiversity	-Production of resources needed to manufacture products: - Plantfibers used for textiles (cotton, etc.) Leather, including exotic leather Fur, Wool, Eider down -Farming and trapping practices concerning raw materials of animal origin Protecting biodiversity	-Production of plant resources needed to manufacture products (rose, jasmine, etc.) -Protecting biodiversity	-Extraction of resources needed to manufacture products: - Gems and precious metals -Exotic leather -Farming and trapping practices concerning raw materials of animal origin -Protecting biodiversity
Waste production	-Production of residues from winemaking or distillation processes and packaging waste -Circular economy	-Unused raw materials, obsolete and unsold products, window displays and events -Customer expectations in relation to more sustainable products -Circular economy	-Point-of-sale advertising, packaging waste, and obsolete and unsold products Circular economy	-Scrap metal - Circular economy	-Point-of-sale advertising, packaging waste, and obsolete and unsold products -Circular economy

Market

Total Addressable Market

Here, the total addressable market (TAM) is defined as the luxury goods global market, and based on a number of assumptions, it is estimated that the size of the market as of today (6^th July 2023) in terms of revenue, is US$354.80bn, and is expected to grow at a CAGR of 3,38% in the forecast period of 2023- 2028.

Financial Highlights

Key Consolidated Data (EUR Millions)	2020	2021	2022
Revenue	44,651	64,215	79,184
Profit from recurring operations	8,305	17,151	21,055
Net profit	4,955	12,698	14,751
Net profit, Group share	4,702	12,036	14,084
Cash from operations before changes in working capital	13,997	22,621	26770
Operating investment	2.478	2,664	4,969
Operating free cash flow	6,117	13,531	10,113
Total equity (a)	38,829	48,909	56,604
Net financial debt (b)	4,241	9,607	9201
Adjusted net financial debt/Equity ratio	10.9%	19.60%	14.30%

(a) Including minority interests

(b) Excluding “Lease liabilities” and “Purchase commitments for minority interests’ shares” included in “Other non-current liabilities”

Business Group - Highlights

Revenue by business group (EUR Millions)	2020	2021	2022
Wines and Spirits	4,755	5,974	7099
Fashion and Leather Goods	21,207	30,896	38,648
Perfumes and Cosmetics	5,248	6,608	7722
Watches and Jewelry	3,356	8,964	10,581
Selective Retailing	10,155	11,754	14,852
Other activities and eliminations	-70	19	281
Total	44,651	64,215	79,184

Profit from recurring operations by business group(EUR millions)	2020	2021	2022
Wines and Spirits	1,388	1,863	2,155
Fashion and Leather Goods	7,188	12,842	15,709
Perfumes and Cosmetics	80	684	660
Watches and Jewelry	302	1,679	2,017
Selective Retailing	-203	534	788
Other activities and eliminations	-450	-451	-274
Total	8,305	17,151	21,055

Financial Statements

Historic

Most recent quarter

Comparing Q1 2023 to Q1 2022, in euro millions, the total LVMH group has experienced a 17% reported and organic increase in revenue from 18,003 to 21,035 respectively. The Wines & Spirits business group recorded a revenue growth of 3% with an organic revenue growth of 14% of the Champagne & Wines sector, due to a strong start to year driven by positive price effect, and a 5% organic revenue decrease of the Cognac & Spirits sector, due to China recovering from Covid impact while US impacted by softer economic environment. The Fashion & Leather Goods business group recorded a revenue growth of 18%, due to exceptional performance, driven by creativity and iconic products, specially in Louis Vuitton. The greatest revenue evolution was observed in the Selective Retailing sector, where an increase of 28% was recorded due to Sephora's strong performance, DFS benefiting from recovery in travel, notably in Asia and Le Bon Marché with its creative animations.

Most recent year

For the fiscal year 2022, ending on the 31st of December, LVMH reported an annual revenue of 79.2 billion euros a 23.3% increase over the previous fiscal year, 2021, as can be seen hereunder. As well as a 17% increase in the groups share of net profit, increasing from 12.036 billion euros in 2021 to 14.084 billion euros in 2022.

Other important financial indicators include:

• a decrease in operating free cash flow by 3.418 billion euros in comparison with 2021.
• dividend of 12 euros in 2022, increased by 20% compared to 2021.
• Gearing of 16% compared to a gearing of 20% in 2021. (Gearing: the ratio of a company's debt to equity)

LVMH's Annual Income Statement

EUR €, Millions, except for earnings per share data	2020	2021	2022
Period Ending:	31-Dec	31-Dec	31-Dec
Revenue	44,651	64,215	79,184
Revenue Growth (year to year)	-16.80%	43.82%	23.31%
Cost of Goods and Services	-15,871	-20,355	-24,988
Gross Margin	28,780	43,860	54,196
Marketing and selling expenses	-16,792	-22,308	-28,151
General and administrative expenses	-3,641	-4,414	-5,027
Income/(Loss) from joint ventures	-42	13	37
Profit from recurring operations	8,305	17,151	21,055
Other operating income and expenses	-333	4	-54
Operating profit	7,972	17,155	21,001
Cost of net financial debt	-35	41	-17
Interest of lease liabilities	-281	-242	-254
Other financial income and expenses	-292	254	-617
Net financial income/(expense)	-608	53	-888
Income Tax Expense	-2,409	-4,510	-5,362
Net Income to Company	4,955	12,698	14,751
Minority Interest in Earnings	-253	-662	-667
Net Income to Stockholders	4,702	12,036	14,084
Basic EPS, (EUR)	9.34	23.90	28.05
Basic Weighted Average Shares Outstanding	503,679,272	503,627,708	502,120,694
Diluted EPS (EUR)	9.33	23.89	28.03
Diluted Weighted Average Shares Outstanding	504,210,133	503,895,592	502,480,100
EBITDA	13,780	23,280	26,720

LVMH's Annual Balance Sheet

Year end date (31/12)	2020	2021	2022
Assets (EUR millions)
Brands and other intangible assets	17,012	24,551	25,432
Goodwill	16,042	25,904	24,782
Property, plant and equipment	18,224	20,193	23,055
Right-of-use assets	12,521	13,705	14,615
Investment in joint ventures and associates	990	1,084	1,066
Non-current available for sale financial assets	739	1,363	1,109
Other non-current assets	845	1,054	1,186
Deferred tax	2,325	3,156	3,661
Non-current Assets	68,698	91,010	94,906
Inventories and work in progress	13,016	16,549	20,319
Trade accounts receivable	2,756	3,787	4,258
Income taxes	392	338	375
Other current assets	3,846	5,606	7,488
Cash and cash equivalents	19,963	8,021	7,300
Current Assets	39,973	34,301	39,740
Total Assets	108,671	125,311	134,646
Liabilities and Equities (EUR millions)
Long-term borrowing	14,065	12,165	10,380
Non-current lease liabilities	10,665	11,887	12,776
Non-current provisions and other liabilities	3,322	3,980	3,902
Deferred tax	5,481	6,704	6,952
Purchase commitments for minority interests' shares	10,991	13,677	12,489
Non-current liabilities	44,524	48,413	46,499
Short-term borrowing	10,638	8,075	9,359
Current lease liabilities	2,163	2,387	2,632
Trade accounts receivable	5,098	7,086	8,788
Income taxes	721	1,267	1,211
Current Provisions and other liabilities	6,698	9,174	9,553
Current Liabilities	25,318	27,989	31,543
Total Liabilities	69,842	76,402	78,042
Equity, Group Share	37,412	47,119	55,111
Minority Interests	1,417	1,790	1,493
Total Equity	38,829	48,909	56,604
Total liabilities and Equity	108,671	125,311	134,646
Total Debt	37,531	34,514	35,147

LVMH's Cash Flow Statement

EUR €, Millions	2020	2021	2022
Cash flow operating activities
Operating profits	7,972	17,155	21,001
Income/loss and dividends received from joint ventures and associates	64	41	26
Net increase in depreciation, amortisation and provisions	3,478	3,139	3,219
Depreciation of right-of-use assets	2,572	2,691	3,007
Other adjustments and computed expemses	-89	-405	-483
Cash from operations before changes in working capital	13,997	22,621	26,770
Cost of net financial debt: interest paid	-58	71	-74
Lease liabilites: interest paid	-290	-231	-240
Tax paid	-2,385	-4,239	-5,604
Change in working capital	-367	426	-3,019
Net cash from/ (used in) operating activities	10,897	18,648	17,833
Cash flow investing activities
Operating investments	-2,478	-2,664	-4,969
Purchase and proceeds from sale of consolidated investments	-536	-13,226	-809
Dividends received	12	10	7
Tax paid relates to non-current available for sale financial assets	-	-	-
Purchase and proceeds from sale of non-current available for sale financial assets	63	-99	-149
Net cash from/ (used in) investing activities	-2,939	-15,979	-5,920
Cash flow financing activities
Interim and final dividends paid	-2,799	-4,161	-6,774
Purchase and proceeds from sale of minority interests	-67	-435	-351
Other equity-related transaction	27	-552	-1,604
Proceeds from borrowings	17,499	251	3,774
Repayment of borrowing	-5,024	-6,413	-3,891
Repayment of lease liabilities	-2,302	-2,453	-2,751
Purchase and proceeds from sale of current available for sale financial assets	69	-1,393	-1,088
Net cash from/ (used in) financing activities	7,403	-15,156	-12,685
Effect of exchange rate changes	-1,052	498	55
Net increase/ decrease in cash and cash equivalents	18,773	-43,124	-717
Cash and cash equivalents at the beginning of period	5,497	19,806	7,817
Cash and cash equivalents at end of period	19,806	7,817	7,100
Total tax paid	-2,501	-4,464	-5,933
Alternative performance measure
EUR €, Millions	2020	2021	2022
Net cash from operating activities	10,897	18,648	17,833
Operating investments	-2,478	-2,664	-4,969
Repayment of lease liabilities	-2,302	-2,453	-2,751
Operating free cash flow	6,117	13,531	10,113

Financial Forecast

What are the assumptions used to estimate the financial forecasts?

Description	Value	Commentary
What’s the estimated current size of the total addressable market?	$354,800,000,000	The total addressable market is defined as the luxury goods global market and , it is estimated that the size of the market as of today (6th July 2023) in terms of revenue, is US$354.80bn.
What growth stage is the company in?	Maturity stage	Research shows that a company goes through four/ five stages of cash flow growth. A key way to determine the stage which a company is in by examining the cash flow patterns. The Stockhub users estimate that with LVMH’s cash flow patterns over the past 4 years: (+) operating cash flow, (-) investing cash flow and (+/-) but with a (-) average of it’s financing cash flow. LVMH is in its maturity stage of growth.
What is the estimated company lifespan? Group - LVMH	80 years	LVMH employees approximately 196,000, making the company a large organisation, research has proven that the average life span of a large company is approximately 50 years. Due to LVMHs exponential revenue growth in the last 36 years, and assuming that the company is in the maturity stage of growth which is approximately 50% of a companies lifecycle, I am going to assume a life span of 80 years.
What is the estimated annual growth of the total addressable market over the lifecycle of the company?	3.38%	The market is estimated to grow at a 3.38% CAGR (Compound Annual Growth Rate) in the forecast period of 2023- 2028.
What is the estimated company peak market share?	Approximately 25%	Take LVMH’s revenue as the revenue specified at the end of 2022, which was 79.2 billion euros. Assuming a currency exchange rate as of 31st Dec 2022 EUR/USD of 1.07. Resulting in a companies annual revenue of 84.744 billion USD.
Which distribution function do you want to use to estimate company revenue?	Gaussian	Research has suggested that the revenue pattern of companies is similar to the pattern produced by the gaussian distribution.
What is the estimated standard deviation of company revenue?

Economic links to cash flow patters

Cash flow type	Introduction	Growth	Shake out	Mature	Decline
Operating	-	+	+/-	+	-
Investing	-	-	+/-	-	+
Financing	+	+	+/-	-	+/-

Valuation

[[File:Screenshot 2023-07-06 at 11.10.01.png|thumb|Unlevered Free Cash Flow [[File:Screenshot 2023-07-06 at 11.10.11.png|thumb|Fixed Assets[[File:Screenshot 2023-07-06 at 11.10.21.png|thumb|Net Working Capital[[File:Screenshot 2023-07-06 at 11.10.54.png|thumb|Weighted Average of Capital

Implied Share Price and Sensitivity Table

Base Case, Bear Case, Bull Case

]]]]]]]]

In the following section, there are 2 valuation methods, DCF model and the relative valuation.

For the DCF model, the base case implied share price is $1175.92, which has a 27.64% potential upside; the bull case implied share is 1436.27, which has a 55.90% upside; the bear case implied share is 782.49, which has a 15.07% downside. Therefore, for a weighted average of 50% bull case, 25% bull case and 25% bear case, we get 1142.65, which has a 31.09% upside. We take these weighted average percentage is because the inflation rate remains high, the FED has 95% chance to increase the interested rate in the next FOMC meeting, due to this uncertainty, a conservative prediction is applied. Also, we assumed that all the growth is constant in the next 5 years of projection, taking the average from the past 5 years for the base case. The bull case and bear case is calculated with the earnings in EV/EBITDA and Net Debt/EBITDA, and the Free Cash Flow Equity Yield based on their free cash flow, both earning price target and the FCFE price target are weighted 50% each. Throughout the calculation, we obtained the WACC with 13.33% and the CAPM is 14.08%.

For the relative valuation,

Competitors Comparison

LVMH Overview: In 2023, LVMH reported a Q1 FY 2023 revenue of 21 billion euros, showing a significant increase of 17% compared to the same period in 2022. LVMH's strength lies in its high level of customer loyalty and diverse portfolio of 75 prestigious brands across various luxury sectors.

Richemont Overview: Richemont, a key competitor of LVMH, reported a sales revenue of 19.95 billion euros in the first quarter of FY 2023. Richemont's focus on watches and jewelry, particularly through brands like Cartier, IWC, and Van Cleef & Arpels, has contributed to its continued growth.

Kering Overview: Kering, another significant competitor of LVMH, reported a revenue of 5.077 billion euros in the first quarter of FY 2023. Kering's most prominent brand, Gucci, contributes significantly to its overall revenue. However, Kering has a weak growth rate of 1% compared to Q1 2022 suggests that its performance is not as strong as that of LVMH and Richemont.

Strengths of Richemont:

1. Focus on watches and jewelry: Richemont's specialization in these sectors has allowed it to become a leader in the industry, attracting customers who specifically seek luxury timepieces and high-end jewelry, and its emphasis on core businesses resonates well with customers who value the culture, history, and pioneer status in the industry.

2. Extensive collection of luxury brands: With 26 luxury brands and businesses in its portfolio, Richemont offers a wide range of options to cater to different consumer preferences.

3.  Richemont's commitment to environmental, social, and governance (ESG) practices in this year is highly attractive to customers and aligns with current policies and expectations.

Strengths of Kering:

1. Customer loyalty to specific brands: Kering has built strong brand loyalty, particularly with Gucci, Bottega Veneta, and Saint Laurent. This customer loyalty contributes to a consistent customer base and brand recognition.

Weaknesses of LVMH in comparison to Richemont:

1. Less competitive in the jewelry industry: LVMH's presence in the jewelry sector is relatively weaker compared to Richemont. To capture a larger market share and increase profitability, LVMH should consider expanding its focus on jewelry.

2. Sustainability focus: Customers are increasingly concerned about sustainability, and products marketed as environmentally friendly have gained traction.

Conclusion:

1. Richemont could be a big competitor: Based on the revenue data and performance analysis, LVMH remains the market leader in the luxury industry. However, it faces major challenges from Richemont, each with its own strengths and weaknesses. LVMH should focus on expanding its presence in the jewelry industry to compete more effectively with Richemont. Besides, The decision of Richemont to reject the acquisition proposal from LVMH could potentially impact Richemont's stock and attract more attention, particularly from investors who value the "more boutique in core business" mindset.

2. Geographical Factor: LVMH has a strong geographical presence in the Asia Pacific region, with most sectors and revenue generated from Asia in 2022. Particularly in China, where the Covid policies have allowed for reopening, the spending power of Chinese consumers continues to rise. The total revenue in Asia will be very significant in 2023. Richemont also generates a significant portion of its revenue from the Asian market. The 2023 total revenue in Asia Pacific of Richemont would be positive to be expected. On the other hand, Kering's performance has been negative, experiencing a decline of 7% from Q1 2022 to Q4 2022. The pace of growth was well below that of competitors.

Overall, LVMH's performance is expected to continue to increase, and there is optimism regarding its total revenue for 2023.

Risks

Investing in any company, including LVMH Moët Hennessy, carries various risk factors. These risks should be carefully considered by potential investors before making a decision. Some risks specifically associated with LVMH Moët Hennessy might include:

1. Economic Fluctuations: As a luxury goods company, LVMH's success is strongly correlated with the global economy's performance. During periods of economic downturn, consumer spending, especially on luxury items, often decreases. This could negatively impact LVMH's revenues and profits.
2. Foreign Exchange Risk: Since LVMH operates worldwide, it's exposed to fluctuations in various currencies. If the euro strengthens against other currencies, it could reduce the company's profits when overseas earnings are converted back into euros.
3. Fashion Trends and Consumer Preferences: The fashion industry is notably fickle, with trends and consumer tastes constantly changing. If LVMH fails to anticipate or adapt to these changes, its brands might lose popularity, impacting the company's financial performance.
4. Regulatory Risks: As a global company, LVMH must comply with a wide array of regulations and laws across multiple jurisdictions. Changes in these regulations, including import/export laws, environmental laws, and taxation policies, could affect its operations.
5. Brand Reputation: The value of LVMH's brands is one of its key assets. Any events that damage these brands' reputations – such as product quality issues, scandals involving brand ambassadors, or negative environmental or social impacts – could harm LVMH's business.
6. Competition: The luxury goods market is highly competitive. LVMH competes with other large luxury groups, as well as smaller, more nimble brands and emerging digital-native brands. If LVMH can't maintain its competitive advantage, it could lose market share.
7. Supply Chain Disruptions: LVMH relies on a complex global supply chain. Disruptions to this chain – such as those caused by natural disasters, geopolitical events, or pandemics – could impact its ability to produce and distribute its products.
8. Intellectual Property Risks: As with many companies in the fashion industry, LVMH faces risks from counterfeiting and other intellectual property violations, which could harm its brands and its financial performance.