This year marks the 200th anniversary of the birth of Louis Vuitton, but also a point of inflexion for LVMH. The world’s largest luxury group has recorded 46 percent revenue growth in the first three quarters, delivered record first-half organic growth for its Fashion & Leather Goods division and pioneered the conquest of the future luxury buyer.
The first six months of 2021 led to an 81 percent jump in terms of organic growth for LVMH’s largest division, Fashion & Leather Goods. The luxury giant has been able to see past the pandemic’s immediate effects, taking advantage of a “buy less, buy better” mindset adopted by younger generations, according to Swetha Ramachandran, investment director at GAM Investments.
In a recent market update, Ramachandran explains that “Millennial and Gen Z consumers, estimated to drive 85 percent of luxury demand by 2035, are increasingly adopting [this] mindset and considering luxury purchases as an investment, thanks to a thriving resale market.” “We have seen demand polarise between the stronger and weaker brands - with LV firmly in the former camp,” she added.
Off-White and Tiffany’s investments, LVMH’s take on diversification
LVMH continues to invest in diversifying its operations, aimed at remaining appealing to consumers with classic and modern tastes alike. Good proof of it is how at the peak of the pandemic, LVMH bought Tiffany, strengthening LVMH’s jewelry business with the addition of one of the world’s most storied jewelry brands.
In August, LVMH made a bold move, buying a majority stake in Off-White, the brainchild of the late Virgil Abloh. This investment is already paying off, as it has boosted LVMH’s ties into the sportswear and streetstyle markets. But, as Bain & Company noted when this deal was made public, Abloh’s appointment to help Louis Vuitton’s menswear group is a reflection of the increasing consumer-driven intermingling of the luxury and streetwear sectors.
Luxury market analysts consulted by FashionUnited remind as well of the growing weight this “more casual, younger, smarter luxury consumer group” is poised to have in the upcoming years. LVMH seems to have taken good note, as showed by different brands on its portfolio: Dior has released its take of the iconic Air Jordan sneaker while TAG Heuer now sponsors Porsche’s racing team and athletes including Naomi Osaka.
LVMH’s long-term strategy pays-off
As Barrons points out, LVMH’s long-term strategy commanded by Bernard Arnault, works, and does it extremely well. The publication highlights how, in addition to its large scale in the apparel sector, LVMH is noted to have benefited from savvy marketing, its ability to lean on celebrities to help keep the numerous brands relevant and attract younger customers. Not only LVMH has been able to boost its margins amidst the pandemic-induced supply chain chaos, but looking ahead, highly diversified LVMH is all set to use its high cash flow to fuel even more strategic deals.
LVMH announced strong Q3 results in mid-October. The company saw revenue rapidly recover from the lows of the novel coronavirus pandemic. In fact, LVMH reported a 46 percent increase in revenue through the first three quarters, with total revenue up 11 percent above 2019 levels. Moreover, Q3 revenue soared 20 percent YOY to $15.5 billion.
Currently, shares at LVMH trade in the 160 dollars region, up 28.7 percent so far in 2021. Indeed, shares are trading at 29 times forward earnings and 6.5 times trailing sales.
Image: Virgil Abloh. Credits: LVMH