LVMH Empire Overview and Insights

Aug 26, 2024

LVMH and Its Empire

Overview of LVMH

  • French Holding Company specialized in luxury goods.
  • Brands Owned: Louis Vuitton, Moet Hennessy, Kenzo, Bulgari, Tag Heuer, Tiffany, Sephora.
  • CEO: Bernard Arnault, currently the richest person on Earth.

Recent Changes

  • Leadership Transition: Bernard Arnault appointed his son, Frédéric Arnault, as Managing Director of the family holding company controlling LVMH and Dior.
  • Succession: Accelerating the process of involving his children more in the business.

Investment Overview

  • 10-Year Investment Example: $1,000 investment 10 years ago would now be worth $4,185, including dividends.
  • Individual Insiders Ownership: Bernard Arnault and his family hold 48% of LVMH through the family holding company, with 63.5% voting rights.

Financial Performance

  • Return on Invested Capital: 14%, higher than the desired 10%.
  • Net Profit Margin: 17.6%, second only to Hermès in the industry.
  • Share Buyback: 0.8% shares bought back over the last 10 years.
  • Debt Management: Can repay long-term debt within one year using current free cash flow.

Growth Metrics

  • Revenue Growth: 9% over 10 years, slightly below target.
  • Free Cash Flow Growth: 11.2% over 10 years, meeting target.
  • Earnings Per Share Growth: 13.5% over 10 years.
  • Dividend Yield: 1.8% with a payout ratio of 43%.
  • Dividend Growth: 16.6% over 5 years.

Valuation

  • Price-to-Earnings (PE) Ratio: 23.5, close to the S&P 500 average.
  • Intrinsic Value Scenarios:
    • Low Scenario: $269
    • Medium Scenario: $290
    • High Scenario: $406
  • Current Price: $762, considered expensive.

Stock Ranking

  • Overall Score: 2.1, ranked 6th among 90 companies analyzed.

Risks

  • Leadership Changes: Uncertainty with Arnault's children taking over.
  • Brand Dilution: Overexpansion may dilute luxury brand image.
  • Global Recession: Could severely impact luxury goods spending.

Opportunities

  • Emerging Market Growth: Potential in China and India.
  • Prestigious Brands: Strong competitive advantage due to brand heritage.
  • Successful Acquisitions: Diversifies portfolio and offers new growth avenues.

If interested in further analysis, consider checking out the video on Hermès or other luxury brands.