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Winner takes all

26 January 2021 By Lisa Jucca

Pandemic, what pandemic? In 10 years’ time, investors looking back at LVMH’s share price performance in 2020 may wonder what the fuss was all about. Bernard Arnault’s 256-billion-euro luxury conglomerate added about 21% to its market value in the past 12 turbulent months, outperforming most peers. Even before it fully absorbs U.S. jeweler Tiffany, LVMH is proving to shareholders it is doing just fine.

The Paris-based conglomerate on Tuesday reported revenue had dropped by a not-so-glamorous 16% on a like-for-like basis last year. But investors are already looking past that. Sales in LVMH’s leather and fashion division, driven by the Louis Vuitton and Dior brands loved by Chinese shoppers, rose 18% year-on-year in the final quarter.

Part of the company’s appeal lies in its diversified operations. With investments including Moet & Chandon champagne, Bulgari jewels, Sephora make-up and Belmond hotels, Arnault’s empire has spread its bets much wider than rival luxury groups Kering and Richemont.

The brand appeal of Louis Vuitton, which analysts estimate accounted for 50% of the group’s operating profit in 2019, remained intact during the pandemic. The maker of $1,200 Speedy bags was even able to hike prices by some 10% in the pandemic, according to Vogue Business. Once vaccines are rolled out and travel restarts, the segments linked to holiday spending should also thrive. That helps explain why LVMH’s shares have outperformed a Breakingviews index of top European luxury players, which is up 13% in the past year.

Investors are also optimistic about LVMH’s ability to turn around Tiffany. Even though Arnault negotiated a $430 million discount, the final $15.8 billion price tag remains hefty. But LVMH is already working on a battle plan to make the jeweler more like Richemont-owned Cartier, which has higher margins. LVMH’s record of improving its acquisitions’ profitability bodes well. When it took over Dior in 2017, the brand represented some 4% of LVMH’s overall operating profit. By 2019 the proportion had nearly doubled, say analysts at UBS.

Repeating such a turnaround at Tiffany would be ambitious and take longer. LVMH has however already added more than $65 billion to its market value since it first agreed to the acquisition in November 2019. That should keep LVMH investors sweet for a while.


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