Jalpa Bhoolia
"Whoever said money can't buy happiness simply didn't know where to go shopping." - Gertrude Stein
In 1987 Louis Vuitton and Moët Hennessy merged, creating the LVMH Group. As a family-run group, LVMH strives to ensure the long-term development of each of its Houses in keeping with their identity, heritage, and expertise. LVMH is home to 75 distinguished Houses rooted in six different sectors across 80 countries. The company produces and sells Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewellery, and Selective Retailing.
The personal luxury goods sector
According to a report by Bain & Company, the market for personal luxury goods, the "core of the core" of luxury segments, experienced its first contraction in 15 years (excluding the Covid period) in 2024. Global luxury consumers grappling with macroeconomic uncertainty and continued price elevation by brands, cut back slightly on discretionary purchases. As a result, the personal luxury goods market dipped to €363 billion in 2024, a 2% decline compared to 2023 at current exchange rates (but flat at constant exchange rates).
The personal luxury goods segment is forecast to grow moderately in 2025, with growth estimated to range between 0% and 4% under the most plausible scenario. This outlook assumes sustained market growth in Western countries and the Middle East, a gradual recovery in China that gains momentum in the second half of the year, and normalising conditions in Japan.
Beyond that, Bain & Company expects solid market fundamentals to result in personal luxury goods market growth of 4% to 6% annually until 2030, reaching an estimated total value of €460 billion to €500 billion by the end of that period.
In 2024, market share attributable to younger generations, Generation Z and Millennials, declined slightly. Generation Z's appetite for luxury goods differed by region, remaining strong in China and Southeast Asia, where these consumers focused more on product quality and sought hyper-personalisation throughout the shopping journey. In contrast, in Western countries and Japan, Generation Z engagement has been cooling, with reduced interaction on digital marketing platforms. These consumers valued more cost-effective purchases and increasingly gravitated toward second-hand platforms.
Long term, the industry's solid fundamentals are expected to continue guiding its growth with tapering interest rates and improving consumer confidence acting as tailwinds. As always, the industry is expected to be more resilient than other areas of the consumer discretionary space since high-income individuals tend to be less impacted by economic cycles.
LVMH plays in the upper end luxury goods space along with the likes of Kering, Richemont, Chanel and so on. The group currently holds majority market share across most of its segments. In Bags & Leather Goods, LVMH holds ~60% of market share, followed by Kering and Hermes. Fashion & Leather Goods remains a key driver of growth, accounting for ~48% of revenue.
LVMH growth strategy
LVMH's vocation is to ensure the development of each of its Maisons while respecting their identity and autonomy. Creativity and innovation are part of LVMH's DNA and have been the key to the success of its Masisons and the basis of their solid reputations. Vertical integration fosters excellence both upstream and downstream, allowing control over every link in the value chain, from sourcing and production facilities to selective retailing. Decentralised organising ensures that Maisons are both autonomous and responsive, allowing for rapid and effective decisions.
LVMH will continue to draw on the strengths of its dynamic teams and solid foundations, including its balanced geographic coverage and diverse portfolio of prestigious brands. The Maisons will continue to enhance their desirability through powerful product-focused initiatives.
Financial performance
Full-year results
The final quarter saw a soft close to the year, following a soft preceding quarter as well.
The overall revenue decline was in line with the broader sector but stands in sharp contrast to that of rival Richemont, who outperformed the sector and reported solid numbers (although it is more heavily weighted to Jewellery). For LVMH, Fashion & Leather Goods (the largest part of its portfolio) still came in better than what analysts had expected.
Segment performance
Balance sheet and returns
Outlook
Notwithstanding a geopolitical and macroeconomic environment that remains uncertain, LVMH remains confident and will pursue its brand development-focused strategy, underpinned by continued innovation and investment, as well as an extremely exacting quest for desirability and quality in its products and their highly selective distribution.
Investment case summary
Risks
Consensus considerations
Valuation
LVMH is trading on 24.8 times forward PE, a small discount to its long-term average and a larger than usual discount to peers. Earnings forecasts for LVMH for FY25 is +11.7%, which is higher than expectations for peers, Hermes (+10.8%) and Kering (+9.8%).
