Following the assessment of LVMH Moët Hennessy Louis Vuitton’s fiscal year 2022 financial well-being in the first report at the beginning of the semester, much has shifted within both the business and fashion sides of the luxury giant. This second report intends to cover recent major news, stock market performance, and what to expect from the multinational conglomerate in the foreseeable future.
Since the beginning of the semester and the release of its fiscal year 2022 financial report, changes have been made to different divisions of LVMH. The company started its 2023 fiscal year with a leadership shakeup which saw Pietro Beccari, who had headed Christian Dior Couture since 2018, becoming Chairman and CEO of Louis Vuitton. Beccari replaced Michael Burke, who spent ten years at the helm of Louis Vuitton and will now assume different responsibilities directly under Chairman and CEO of LVMH Bernard Arnault. Another crucial change happened at Christian Dior where Delphine Arnault, Executive Vice President of Louis Vuitton since 2013 and daughter of LVMH CEO Bernard Arnault, succeeded Pietro Beccari and became Chairman and CEO of Christian Dior Couture. The internal reorganization did not stop there as LVMH also reshuffled another important part of its business by appointing Stéphane Rinderknech as chief executive and chairman of its beauty division, which oversees Tiffany & Co. According to Vogue, the announcement signals LVMH’s determination to compete aggressively in the beauty market following main competitor Kering’s announcement of an in-house beauty division specializing in cosmetics and perfumes. These executive changes were effective as of February 1, 2023.
Delphine Arnault, the only daughter of Chairman and CEO Bernard Arnault, officially returned to Dior in her new role as Chairman and CEO of Christian Dior Couture after starting her career in luxury retailing at the Maison 12 years ago, beginning with shoes and progressing to deputy managing director – where she played the main role in minimizing the negative fallout of John Galliano’s infamous departure from Dior in 2011. Delphine Arnault’s arrival at Dior comes at a critical time as LVMH’s second-largest brand has vastly transformed in recent years. Dior’s revenue quadrupled since 2018 to more than 9 billion dollars under her predecessor Pietro Beccari, whom has transferred internally to head the group’s largest brand, Louis Vuitton. Having been with LVMH since 2006, Pietro Beccari served as Executive Vice-President of Marketing and Communications for Louis Vuitton before becoming Chairman and CEO of Fendi in 2012. In 2018, he was appointed Chairman and CEO of Christian Dior Couture where he led the House to a massive rebranding with the rise of influencers and social media as he aimed to establish a new global following for Dior. According to Business Of Fashion, with an operating margin of more than 35 percent of total sales, Dior is “now the fourth most-profitable listed luxury fashion brand, after LVMH’s Louis Vuitton, Kering’s Gucci and Hermès.” By aggressively overhauling commercial offers, e-commerce and flagship stores, Beccari has completely transformed the 75-year-old Maison Couture with the help of creative directors Maria Grazia Chiuri and Kim Jones. He is certainly going to make a sizable impact on its stablemate now as Chairman and CEO of Louis Vuitton.
The adjustments happened at two of LVMH’s most important and profitable brands Louis Vuitton and Dior, and therefore are certainly going to considerably impact LVMH’s financial performance as a whole. With that being said, the full extent of said impact remains to be seen in the company’s earnings in the fiscal year 2023, with the first quarterly report scheduled to be released in April 2023. Besides major executive reshuffling, the French luxury corporation also made a significant change to its fashion side as Pharrell Williams was named Louis Vuitton’s new Men’s Creative Director, succeeding the late designer Virgil Abloh. His first collection for Louis Vuitton is set to be unveiled in June 2024 during Men’s Paris Fashion Week. The direct impact of this decision on sales and public reception will be seen in the reports of the next fiscal year 2024 onwards.
After a strong performance on the stock market throughout the fiscal year 2022, analysts continue to remain optimistic about LVMH’s stock (LVMUY), listed on the Euronext Paris Eurolist. According to the Zacks Rank, LVMH Moët Hennessy Louis Vuitton SA is a member of the Consumer Discretionary sector and is currently holding a Zacks Rank of a Strong Buy. Over the month of February of 2023, the Zacks Consensus Estimate for LVMH’s full-year earnings of the fiscal year 2023 had increased by over 10 percent. “This means that general analyst sentiment is stronger and the stock’s earnings outlook is improving.” Based on the latest available data as of March 1, 2023 from the Zacks Rank, LVMH’s stock LVMUY has gained about 15 percent so far this year. Within its sector of Consumer Discretionary, on average companies have climbed around 9 percent. Thus, LVMH is overperforming its peer so far this year and is well on track to retain its position as the unanimous leader of the luxury goods industry for another year.
LVMH’s stock is an expensive buy but a trustworthy one. LVMYU “is an evergreen stock,” said The Motley Fool as its 52-week range at the moment fluctuates between 535.0 euros to 830.7 euros per share. Bringing in 79.184 billion euros in revenue and 14.751 billion euros in net profit, the luxury giant saw considerable increases in both revenue and profit for the fiscal year 2022, in which all business divisions recorded growth. Having been able to produce such a stable financial performance despite economic fluctuations around the world and especially lockdowns in China – one of its biggest consumer markets – very much further strengthened LVMH’s position on the stock market. Analysts expect LVMH to continue the momentum and grow its revenue and earnings by 8 percent and 15 percent respectively in the fiscal year 2023. Regarding possible economic downturns in the foreseeable future with a recession looming over the global economy, Nicole Kornitzer from the Buffalo International Fund said “LVMH would continue to have pricing power because of the demand for its brands, which include Tiffany, Christian Dior, Fendi and many others, noting its ability, in the face of a crisis, to cut costs,” as the luxury giant had shown in recent years during which the global market was plagued by the COVID-19 pandemic.
Founded in 1987, LVMH Moët Hennessy Louis Vuitton has grown exponentially since acquiring its first luxury brand Céline, now Celine, in 1988 into what it is now, the most powerful luxury goods conglomerate in the world with a market capitalization of over 400 billion euros as of March 2023. And for more than a decade, LVMH has been successfully operating in the maturity stage of the business cycle and is one of the best at maintaining its position there. The luxury giant’s fundamental model as a family-run business headed by Chairman and CEO Bernard Arnault is the main foundation behind the rapid growth of LVMH. “This business is run for the next generation – they think like a family. They think for the next 15 to 20 years,” said Erwan Rambourg, global head of consumer and retail research at HSBC, in an interview with The New York Post. To continuously prolong its life cycle in the maturity stage, LVMH operates on six pillars: Decentralized organization, organic growth, vertical integration, creating synergies, sustaining savoir-faire and balance across business segments and geographies. Indeed, LVMH’s massive success year after year for over a decade has been fuelled by discipline and vision from the executive committee down to all business divisions and member brands.
One method LVMH constantly successfully implements to rebirth itself while still at its peak is purchasing new brands. The conglomerate is comprised of 75 Maison houses across five business sectors and claims it “strives to ensure the long-term development of each of its Houses in keeping with their identity, their heritage and their expertise.” With every new integration of a new House, LVMH rebrands itself as a whole while growing its profit margins as it adds a powerful new stream of revenue. “LVMH is very good at keeping their brands on top. And they generate free-cash flow to continue buying brands,” said Kornitzer following the completion of LVMH’s purchase of Tiffany & Co., which was announced in 2021. According to Euromonitor, Tiffany was the largest contributor to LVMH’s financial growth over the past two years. LVMH’s revenue in the jewelry and watches category was up 18 percent to 11.35 billion dollars in 2022, with Tiffany’s earnings now double what they were pre-acquisition.
Bernard Arnault entered the luxury market in 1987 and has since scaled LVMH into the biggest luxury goods empire in the world through aggressive acquisitions and disciplined brand management. He has a reputation for aggressive dealmaking, having built LVMH by “often leveraging dissent within family-owned businesses” which led to multiple successful takeovers while being able to keep all in-house brands competitive within the corporation itself. LVMH’s most notable purchases throughout the last decade include the above-mentioned Tiffany & Co. in 2021, Rihanna’s Fenty in 2019 and Rimowa in 2016. All of these acquisitions, whether big or small, have each seen a complete makeover of the brand and have all contributed to LVMH’s massive prowess in all five of its business sections. As seen in numbers in 2022, the Wines & Spirits business group recorded a revenue growth of 19 percent, the Fashion & Leather Goods business group recorded a revenue growth of 25 percent, the Perfumes & Cosmetics business group recorded a revenue growth of 17 percent, the Watches & Jewelry business group recorded a revenue growth of 18 percent while Selective Retailing revenue was up 26 percent.
LVMH Moët Hennessy Louis Vuitton is one of the most well-run companies in the world and there are very few challenges that are not always far-ahead anticipated by Chairman and CEO Bernard Arnault and his executive committee. As the company prepares to release its highly-anticipated first-quarter earnings report for the fiscal year 2023 in April, there is much to look forward to in the foreseeable future for LVMH. With China’s recent reopening of the country and subsequently the consumer market, the sales of luxury goods are bound to see a massive surge and LVMH will certainly be the main beneficiary in the luxury retailing industry with Louis Vuitton’s and Dior’s vast following in China. Fast forwarding to the future, it is exciting to observe how LVMH continues its reign in the next decade, post-Bernard Arnault, while finding a way to preserve all core values that essentially constitute the company.
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