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LVMH - double digit growth across all areas

LVMH has recorded a 20% increase in organic revenue in the first nine months of the financial year.

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LVMH has recorded a 20% increase in organic revenue in the first nine months of the financial year, reaching EUR56.5bn. In the third quarter organic revenue was 19% higher. There was double-digit organic growth across all business areas.

This reflects notable increases across Europe, US and Japan because of good demand from local customers, as well as increased recovery in international travel.

While the group maintains confidence in its outlook, it acknowledged the "uncertain geopolitical and economic backdrop".

The shares rose 1.2% following the announcement.

View the latest LVMH share price and how to deal

Our view

LVMH is a lesson in retail resilience.

Its formidable Fashion & Leather Goods division, not forgetting the jewellery and cosmetics businesses, house LVMH's biggest superpower. Brands. Christian Dior, TAG Heuer watches and Hennessy cognac are status symbols, and revenue is much stickier than for traditional retailers. It also helps that LVMH's mega-wealthy customer base means it's able to weather an economic downturn better than some. Spending should be more reliable if things take a turn for the worst. The cost-of-living crisis is also far less likely to put this type of customer off.

Having high-net worth individuals as your core demographic also means the sky-high ticket prices simply don't deter these shoppers. And those higher price points are supported by what we view as genuine creative and marketing superiority at LVMH. Being able to charge more and repeatedly encourage high demand means LVMH's operating margins are in the mid-twenties- in-line with, or above, its peers.

Adept management is a serious asset too. The group has Bernard Arnault, CEO for the best part of five decades, to thank. He is also the group's largest shareholder, his family owns 48% of the shares, which probably explains the focus on long-term success.

But LVMH isn't home and dry. The group relies heavily on international travel, both in airports and among tourists splashing the cash while abroad. It's unclear when this side of trading is expected to fully normalise, but it's likely to act as a drag for some time - although we must admit we're pleased with recent progress.

Debt is also a source of concern. The root cause of the balance sheet stretch was the acquisition of jewellery giant Tiffany. The deal seems to be bearing fruit, but debt reduction is likely to be a focus in the short term.

We have faith in LVMH's unrivalled stable of brands and more resilient customer base. We think LVMH can thrive over the long-term. As ever though, there are no guarantees and all share prices can go down as well as up. That's especially true in the current uncertain economic climate.

LVMH key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

Nine-month trading update (figures are organic)

In Wines & Spirits, revenue rose 14% to €5.2bn, with a particularly strong showing in Europe, US and Japan. Looking at Hennessy cognac, supply chain issues in the US and lockdown restrictions in China were offset by LVMH's decision to continue increasing prices. The group said strong demand for its Champagne houses placed extra pressure on supplies.

The largest division, Fashion & Leather Goods, recorded sales of €27.8bn, up 24%. Louis Vuitton did well, and the latest collections have been well-received. Dior also achieved "remarkable" growth.

A "selective" distribution strategy helped Perfumes & Cosmetics rise 12% to EUR5.6bn. Sauvage, Miss Dior and J'adore did especially well across the Dior range. A new Stella McCartney skincare range was also launched.

Watches & Jewlry rose 16% to €7.6bn, reflecting good growth in Tiffany & Co in the US, as well as new additions to Bulgari's collections. TAG Heuer unveiled its new Caliber E4 - Porsche Edition smart watch and Hublot continued the countdown to the 2022 Football World Cup as its official timekeeper.

A recovery in store activity helped Sephora sales improve, which boosted Selective Retailing. Divisional revenue jumped 20% to €10.1bn. The group's invested in Sephora's online strategy. Travel business, DFS was again held back by reduced travel and ongoing covid restrictions in Asia.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Sophie Lund-Yates
Sophie Lund-Yates
Lead Equity Analyst

Sophie is a lead on our Equity Research team, providing research and regular articles on a selection of individual companies and wider sectors. Sophie's specialities are Retail, Fast Moving Consumer Goods (FMCG), Aerospace & Defence as well as a few of the big tech names including Facebook and Apple.

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Article history
Published: 12th October 2022