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 (Nude, 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, the richest man in France, and his family own about 46% of LVMH through Groupe Arnault. In 2016 the company agreed to sell its majority stake in Donna Karan International to G-III Apparel Group.
LVMH operates through six groups: Fashion & Leather Goods, Wine & Spirits, Perfumes & Cosmetics, Watches & Jewelry, Selective Retailing, and other activities. Fashion & Leather Goods is the largest segment, accounting for some 35% of revenue. Selective Retailing and other activities together generate 30%.
The Paris-based luxury powerhouse operates more than 3,800 stores across Asia, Europe, and North America, with recent growth in store numbers focused mainly in Asia. 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 10%). The US represents more than a quarter of revenue.
Note: Growth rates may differ after conversion to US Dollars.
After a period of relatively flat sales during the global financial crisis, LVMH has experienced six consecutive years of revenue growth. Indeed, sales hit €35.7 billion in 2015, a 16% increase in revenue versus 2014 and an all-time record for the luxury goods company. Net profits fell year on year in 2015, largely due to an exceptional gain in 2014, to €3.6 billion in 2015, down 37%. Like its customers, the company is cash rich, reporting €3.7 billion in free cash flow from operations in 2015.
Organic revenue growth was 6% that year, with an additional 10% increase a result of favorable currency exchange rates. The five main business groups all saw significant improvements on prior year. The largest chunk of revenue growth was in the Selective Retailing business, which expanded by €1.7 billion to €11.2 billion, due to, among other things, impressive performance in the Middle East and North America. Fashion & Leather Goods, the largest business by revenue at €12.4 billion in 2015, also grew strongly, while Watches & Jewelry recorded the organization's fastest growth at 19%.
Regionally, while slowing growth in the Chinese middle class has seen Asia fall as a percentage of total revenue, it remains the company's largest market at more than 35%, ahead of the United States at 26%.
With the market for luxury goods in shaping up well, LVMH is flush with cash for acquisitions and organic growth. Indeed, the company is growing its stores base in all of its markets bar Japan, where the number of stores fell from 412 in 2014 to 407 in 2015; in total, LVMH added 152 stores in 2015. 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 70 brands as possible. LVMH has more than 3,800 retail outlets (more than 85% 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 Bulgari, have strengthened despite adverse global economic conditions.
LVMH has put innovation in digital at the forefront of its strategy, and recognizes the need to create a digital experience that can match that of its luxurious stores. It is also tightening the link between the physical and digital spheres, with its Sephora subsidiary leading the way with mobile terminals and other features.
Mergers and Acquisitions
LVMH has agreed to acquire Germany luxury luggage brand Rimowa for around €640 million. Bernard Arnault's son Alexandre will become co-chief director. The acquisition increases LVHM's exposure to the growing tourism market.