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LVMH - double digit growth in most divisions

First quarter revenue rose 23% to €18bn, on an organic basis.

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First quarter revenue rose 23% to €18bn, on an organic basis. There was double digit growth across all division, apart from Wines & Spirits, which was held back by supply chain disruption.

The group said: "LVMH had a good start to the year against a backdrop of continued disruption from the health crisis and marked by the dramatic events in Ukraine".

The shares rose 1.7% following the announcement.

View the latest LVMH share price and how to deal

Our view

Supply chain disruption is denting LVMH's Wine & Spirits' ability to trade. But the joy of LVMH's model is that there's a smorgasbord of other business that can pick up the slack.

The biggest of those is the formidable Fashion & Leather Goods division, not forgetting the jewellery and cosmetics businesses too. Together, these all 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. Those higher price tags and more stable demand often means strong margins.

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 47.9% of the shares, which probably explains the focus on long-term success.

That's not to say LVMH is 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.

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.

Overall, we have faith in LVMH's unrivalled stable of brands and more resilient customer base. We think LVMH can thrive over the long-term. But we would be remiss not to mention the valuation, which is some way above the ten year average and increases the likelihood of ups and downs.

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.

First quarter trading details (figures are organic)

The biggest division, Fashion & Leather Goods, saw revenue rise 30% to €9.1bn. Louis Vuitton and Christian Dior were standout performers, while Fendi and Celine also did well.

"Persistent weakness" in international travel held back travel business DFS, but this was offset by growth elsewhere, including at Sephora. As a result, Selective Retailing revenue rose 24% to €3.0bn.

Watches & Jewellery revenue rose 19% to €2.3bn. Tiffany & Co. had a strong start to the year, largely driven by growth in the US.

Revenue of €1.9bn was 17% higher than last year in Perfumes & Cosmetics. Growth across perfume and make up products, particularly in the US, was named as a key contributor. Dior is also said to have done well.

Despite a strong start for Champagne, with volumes rising sharply, overall growth in the Wines & Spirits business was much lower than elsewhere. Revenue rose 2% to €1.6bn. LVMH said: "In the current geopolitical context and in light of the ongoing impact of the pandemic, LVMH remains both vigilant and confident at the beginning of this year. The Group will continue to pursue its strategy focused on the development of its brands, driven by strong innovation and investment as well as a constant quest for quality in its products and their distribution."

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: 13th April 2022