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.
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.[1]
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]
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]
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 (6th 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.[4]
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[5]
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 if 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.[6]
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 |
Growth Drivers and Catalysts
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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
References and notes
- ↑ https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion
- ↑ https://www.reuters.com/markets/asia/sp-global-cuts-china-2023-growth-forecast-52-55-2023-06-26/
- ↑ https://www.bain.com/about/media-center/press-releases/2022/global-luxury-goods-market-takes-2022-leap-forward-and-remains-poised--for-further-growth-despite-economic-turbulence/#:~:text=Global%20luxury%20goods%20market%20takes%202022%20leap%20forward,60%25%2B%20market%20growth%20to%202030%20...%20More%20items
- ↑ Luxury Goods - Worldwide | Statista Market Forecast
- ↑ lvmh_2022_annual-report.pdf (lvmh-static.com)
- ↑ Présentation PowerPoint (lvmh-static.com)