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LVMH - record Fashion and Leather Goods sales

LVMH's full year organic revenue rose 36% to €64.2bn, reflecting record Fashion & Leather Goods sales...

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LVMH's full year organic revenue rose 36% to €64.2bn, reflecting record Fashion & Leather Goods sales and strong growth in China and the US. Europe returned to growth in the final quarter. Compared to pre-pandemic levels, revenue was up 14%.

Profit from recurring operations more than doubled compared to last year, reaching €17.2bn.

The group's proposing a dividend of €10 per share.

The shares rose 1.2% following the announcement.

View the latest LVMH share price and how to deal

Our View

There's no way to put LVMH's sales other than, impressive.

Social events are filling up calendars once more, but the world is far from back to normal. LVMH make the kind of clothes that are made to be seen, which makes sales progress in the current environment all the more impressive.

Therein lies its power. Brands, like 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.

Having high-net worth individuals as your core demographic also means the sky-high ticket prices simply don't put customers off. Those higher price tags and more stable demand mean 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 47.5% 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 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.

Nine month trading details

Fashion & Leather Goods saw revenue rise 47% to €30.9bn. This was largely down to a good performance from key brands, including Louis Vuitton and Christian Dior. Profits rose almost 80% and stood at €12.8bn. Sales and profits also rose at a similar rate when compared to pre-pandemic times.

Reduced travel volumes held back Selective Retailing, although the division did return to profit. Sephora did well thanks to a good rebound in store sales, plus expansion in the US and China. Travel business DFS is still feeling the effect of weaker tourism. Divisional revenue rose 18% to €11.8bn.

Watches & Jewelry saw revenues rise 40% to €9.0bn, as new product initiatives in core brands including TAG Heuer paid off. Including the performance of Tiffany, revenues rose 167%, as the jewellery chain saw record revenue as well as profits. Including Tiffany, divisional rose over 5 times compared to last year.

The opening of restaurants and increasing tourism meant growth was strong in the US and Europe for Wines & Spirits. Revenue rose 26% to €6.0bn, while profit rose 34%. Hennessy cognac and Champagne saw increases in demand.

Marketing and selling expenses were broadly flat compared to 2019 at €20.3bn. Free cash flow of €13.5bn was significantly higher than last year and pre-pandemic levels. Net debt, including lease payments due in the next year, was €14.6bn. That's increased since last year, largely because of reduced cash.

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: 28th January 2022