It's been quite a successful few weeks for LVMH, the world's largest luxury brand group, which owns (among other companies) Louis Vuitton. It has become the first European company to reach a market capitalisation of US$500 billion, a milestone that brings it closer to Tesla in ninth place as the world's largest listed company. We're sure that news like this has only spread their wings, and they'll use it to continue to move forward. We decided to take a look at what the future holds for them.
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LVMH breaks records
The $500 billion market capitalisation milestone
LVMH Moet Hennessy Louis Vuitton has reached a market capitalisation of $500 billion, becoming the first European company to reach this milestone. The fashion company's shares climbed higher than Friday's close and, combined with the recent strengthening of the euro against the dollar, temporarily pushed its total market capitalisation above $500 billion. Earlier this month, *LVMH reported strong first-quarter revenue growth, thanks largely to strong demand in its key Chinese market. The luxury giant, which is controlled by Bernard Arnault, owns many well-known brands, such as Dior, Louis Vuitton, Tiffany, and Hennessy cognac. The company's sales in the first three months of this year rose 17%, double the forecast.
LVMH credited a 14% increase in sales in Asia, excluding Japan, as the company's main source of growth this year. This marks a significant improvement from the 8% decline recorded in the fourth quarter of 2020, when LVMH focused on China as a sales driver. Although the sudden easing of pandemic-era measures led to a wave of COVID-19 cases in the previous quarter, the company continued to view China as a key market for its high-end products. LVMH also saw strong sales growth in Europe, up 24%, while growth in the US was more modest at 8% for the quarter.[1]
LVMH is approaching Tesla's market capitalisation
LVMH is fast approaching Tesla's position as the ninth-largest company in the world by market capitalisation, just days after entering the top ten. Shares of the luxury goods company are up 6.9% this month on strong first-quarter earnings. Tesla's value, meanwhile, fell 23% in the same period as price cuts affected the electric carmaker's profitability, resulting in a market capitalisation of $505bn. The leaders of the two companies have already swapped positions on Bloomberg's billionaire list for 2022. LVMH's rising value has boosted Bernard Arnault's fortune to nearly $212 billion, making him the world's richest man, while Elon Musk has fallen to second place with a fortune of "only" $165 billion. The rally of LVMH and other French luxury rivals has cemented Paris's position as Europe's largest stock market and boosted the CAC 40 index to record highs, with a gain of more than 15% this year. [2]
Development of LVMH shares
Since their IPO in 1990, when their price hovered at EUR 19.86, their shares have gone through an outstanding journey. Over the past 33 years, they have managed to rise by more than 4 400% to reach the price of EUR 892.50 where they are today. In fact, their shares did amazingly well even during the Covid pandemic, when it suffered a drop of "only" 15%, but has been rising ever since.* With the price almost at an all-time high, the company is still showing good plans, so we could predict that the price could rise even more. [3] [1]
LVMH's shares development over the past five years. (Source: Google Finance) *
Tiffany's reopening and new ownership
Tiffany & Co's flagship store, located at the corner of Fifth Avenue and East 57th Street, has undergone a costly renovation that represents a significant capital investment in one of New York City's most iconic shopping districts. After a downturn in tourism due to the pandemic, luxury goods retailers are once again relying on renovated flagship stores to generate customer interest and foot traffic. LVMH bought Tiffany for $16 billion in 2021 after a fierce legal battle. The newly renovated flagship store, which reopened on Friday, is a key debut for the location, which accounted for 10% of Tiffany's global sales before it closed for renovations in 2019. The redevelopment of the entire 10-story building was led by architect Peter Marino, who is known for his work on some of the luxury industry's biggest flagship stores. [4]
Conclusion
LVMH obviously knows what it is doing. Breaking the record in Europe, matching Tesla and constantly growing sales show that they are on the right track, and they are certainly not stopping now. Even though their shares are near an all-time high, there's still room to move. And one more thing to remember, with news like this, they will gain even more confidence from other investors. After checking out the company in detail, we've decided that this is an interesting pick to follow.
Commentary by Ozios Chief Analyst Adam Austera
* Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate or based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied in any forward-looking statements.
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