LVMH Builds Recession-Proof Empire as Luxury Powerhouse

LVMH Moët Hennessy - Louis Vuitton, Société Européenne, the Paris-basedluxury giant, has solidified its position as a recession-proof empire in the world of luxury goods. With a market cap of $410.6 billion, LVMH has been named Europe's most valuable company, driven by the consistent outperformance of the luxury industry in recent years.

The company's revenues and earnings per share (EPS) have grown at a compound annual growth rate (CAGR) of 11.5% and 16.1%, respectively, over the past decade. In 2023, LVMH's revenues and EPS rose by 9% and 8%, respectively, to record figures of €93.4 billion and €6.58. Despite prevailing geopolitical and macroeconomic uncertainties, LVMH kicked off 2024 on a high note, with management remaining confident in its ability to sustain strong growth.

Why this matters: The success of luxury companies like LVMH has significant implications for the global economy, as they often serve as bellwethers for consumer spending and confidence. As LVMH continues to thrive, it may signal a more resilient economy than previously thought, with potential ripple effects on other industries and markets.

LVMH's luxury brands, including Louis Vuitton, Moët & Chandon, and Hennessy, are targeting the very wealthy and have seen significant sales growth. The company's beauty segment has also been an important driver of its recent earnings. In the first quarter of 2024, LVMH's sales jumped to $4.1 billion, beating expectations and causing shares to rise as much as 1.3%.

The company is betting billions on in-person shopping by turning old buildings into mixed-use centers focused on luxury. Michael Burke, the head of LVMH Fashion Group, stated in an interview with The Wall Street Journal, "All roads lead to real estate." LVMH is also expanding its presence in Hong Kong's luxury retail market, with Louis Vuitton reopening its store in Times Square three years after it shut down.

In June 2023, LVMH became a premium sponsor of the Paris Olympic Games of 2024, paying nearly $160 million for the status. The company is also investing in artificial intelligence technology to revolutionize its business. The influential Arnault family, led by Bernard Arnault, has further solidified its control over LVMH with the addition of two sons to the board.

LVMH's success story is not an isolated case in the luxury industry. Fellow French luxury giant Hermès International has also outperformed both major European and U.S. indices, with revenues and EPS growing at a CAGR of 13.6% and 18.5%, respectively, over the past 10 years. Italian luxury sports car manufacturer Ferrari has similarly maintained an impressive trajectory of market-beating returns, leveraging the scarcity of its products to command premium pricing and drive rapid financial growth.

As LVMH continues to build its recession-proof empire, the luxury industry shows no signs of slowing down. With affluent consumers proving less susceptible to economic downturns and luxury stocks demonstrating resilience in the face of market volatility, LVMH is well-positioned to maintain its dominance as a global luxury powerhouse.

Key Takeaways

• LVMH named Europe's most valuable company with a market cap of $410.6 billion.
• LVMH's revenues and EPS grew 9% and 8% in 2023, respectively, to record figures.
• LVMH's luxury brands, including Louis Vuitton, drive sales growth among the very wealthy.
• The company is investing in in-person shopping, AI tech, and expanding in Hong Kong.
• LVMH's success signals a resilient economy, with potential ripple effects on other industries.