LVMH Moët Hennessy Louis Vuitton is the world's largest luxury goods company, with brands that are bywords for the good life and everything showy. LVMH makes wines and spirits (Dom Pérignon, Moët & Chandon, Veuve Clicquot, and Hennessy), perfumes (Christian Dior, Guerlain, and Givenchy), cosmetics (Bliss, Fresh, and BeneFit), fashion and leather goods (Donna Karan, Givenchy, Kenzo, and Louis Vuitton), and watches and jewelry (TAG Heuer, Bulgari). LVMH's selective retail division includes Sephora cosmetics stores, Le Bon Marché Paris department stores, and 61% of DFS Group (duty-free shops). Chairman Bernard Arnault and his family, through Groupe Arnault, own about 46% of LVMH.
The Paris-based luxury powerhouse operates some 3,385 stores across Asia (including China and Japan), Europe, and North America. While more than a third of its stores are in Europe, Asia is the company's single largest market, accounting for more than 35% of sales. LVMH rings up about 30% of its sales in Europe (including France with 11%). The US represents more than 20%.
After a period of relatively flat sales during the global financial crisis, LVMH has experience four consecutive years of accelerating revenue growth. Indeed, sales topped €29.1 billion ($40 billion) in 2013, an 8% increase in organic revenue versus 2012, and an all-time record for the luxury goods company. Profits have risen as well, with net income topping $4.7 billion in 2013, up 5% over 2012. Like its customers, the company is cash rich, reporting more than $4 billion in cash flow from operations in 2013.
Driving revenue growth in 2013 were the company's Selective Retailing business, which reported a double-digit increase in sales, and to a lesser extent Wines & Spirits, and Perfumes & Cosmetics. Fashion & Leather Goods and Watches & Jewelry posted year-over-year declines in sales. On a regional basis, Asia (excluding Japan) contributed a growing share (30%) of the group's revenue in 2013, while Japan and Europe (excluding France) accounted for less. Challenging economic conditions kept a lid on growth in Europe and France.
With the market for luxury goods on a tear -- especially in fast-growing markets in Asia -- LVMH is flush with cash for acquisitions and organic growth. Indeed, the company is growing its stores base in all of its markets, except for Japan, where it held steady at 370 shops in 2013. LVMH added 180 stores in 2013 after adding about 165 in 2012. China is a huge emerging market for luxury goods, including wines & spirits, and a pillar of growth for the French company.
The company has been focusing on controlling as much of its distribution across its 60 brands as possible. LVMH has more than 3,380 retail outlets (87% are outside France). Nearly half belong to its Selective Retailing business, which consists primarily of Sephora cosmetics stores. About 40% are fashion and leather goods shops, led by Louis Vuitton, and also include Fendi boutiques, and hundreds of other shops under the Celine, Givenchy, Donna Karan, Thomas Pink, Pucci, and Marc Jacobs brands, among others. LVMH's namesake Louis Vuitton brand, as well as Fendi and Marc Jacobs, are proving resilient in Europe, despite the economic slowdown there, and posting strong revenue gains in Asia.
Striking out in a new direction, the luxury goods firm has entered the hotel business via a partnership with Egypt's Orascom Development Holding. Together the two are developing upmarket resorts in Egypt and Oman, with LVMH overseeing the design and running of the hotels.
Mergers and Acquisitions
LVMH expanded its products portfolio in mid-2013 when it purchased an 80% stake in Italian cashmere company Loro Piana for $2.57 billion, more than three times the $900 million in sales the company had expected to post in 2013. LVMH values Loro Piana for its products' unique quality and craftsmanship and its six generations of leadership. As part of the transaction, the cashmere company's owners will retain a stake in the business.
Putting its ample cash to good use, in late 2011 the French luxury goods firm completed a €3.7 billion ($5 billion) tender offer for the shares of Rome-based jeweler Bulgari. Bulgari is the smallest of the major luxury jewelry and watch makers and the deal doubles LVMH's watch and jewelry business. The Bulgari deal was announced soon after LVMH acquired a pair of niche brands: Ole Henriksen and Nude skin care. In late 2010, LVMH bought more than 20% of the shares of its rival Hermes International. While LVMH described the move as friendly and said it would not launch a takeover bid for Hermes, it nevertheless led to speculation regarding further consolidation in the luxury goods industry as LVMH is known for its predatory nature.