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LVMH - organic revenue up 21%, profits rise by a third

First half revenue rose 21% on an organic basis, to €36.7bn.

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First half revenue rose 21% on an organic basis, to €36.7bn. That reflects double digit growth across all business areas and profit from recurring operations rose 34% to €10.2bn.

Looking ahead, LVMH said "given the current geopolitical environment and taking into account the health situation, the Group will maintain a strategy focused on continuously strengthening the desirability of its brands".

An interim dividend of €5.00 per share will be paid on 5 December 2022.

The shares were unmoved following the announcement.

View the latest LVMH share price and how to deal

Our view

Supply chain constraints are denting LVMH's Wine & Spirits' ability to trade. But the joy of LVMH's model is that there's a smorgasbord of other businesses 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. 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 47.9% 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.

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. But a price to earnings ratio of 22 means there's pressure not to put a foot wrong.

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 Half Results (revenue figures are quoted on an organic basis)

The Louis Vuitton brand had an "excellent" first half, helping revenue in Fashion & Leather Goods rise 24% to €18.1bn. Christian Dior, Fendi, Celine, Loro Piana and Loewe also did well. The strong performance meant underlying divisional operating profits increased 33% to €7.5bn.

In the Wines & Spirits business revenue rose 14% to €3.3bn, led by a 16% increase in Champagne volumes, which is putting pressure on supplies. There was a strong performance in Europe, the US and Japan, while ongoing restrictions in China and logistical challenges were offset by price increases and catch-up deliveries for Hennessy. Underlying operating profits were up 25% to €1.2bn.

Revenue growth was slower for Watches & Jewlry but still in double digits, rising 16%, reflecting progress from Tiffany & Co, especially in the US. Underlying operating profit rose 26% to €987m.

Underlying operating profit for Perfumes & Cosmetics fell 1% to €388m. Meanwhile profits more than doubled to €367m respectively in Selective Retailing. The strong showing from Selective Retailing was led by a rebound in in-store shopping at Sephora.

LVMH generated free cash flow of €4.0bn, while net financial debt totalled €11.1bn. including money due for store leases, was €28.9bn as at the end of June 2022.

LVMH didn't provide any specific updates to guidance.

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: 27th July 2022