Thursday, 23 April 2009

analysis of LVMH's 2009 first quarter results

LVMH released their financial results for the first three months of 2009 (Q1) yesterday. for those unfamiliar, LVMH is the leading retail conglomerate, and one of france's 40 biggest companies by market capitalisation. it splits it's business operations into 5 broad categories:
- wine & spirits / moet & chandon, dom perignon, belvedere vodka etc
- fashion & leather goods / louis vuitton, dior, loewe, givenchy, marc jacobs, fendi etc
- perfume & cosmetics / guerlain, parfums dior, acqua di parma etc
- watches & jewelry / tag heuer, zenith, hublot, de beers etc
- selective retailing / dfs stores, sephora retail stores, french dept store le bon marche etc

so how did the group perform? the press release reads "LVMH demonstrates good resilience in the first quarter of 2009: slight increase in revenue "
as compared to 2008, their sales was up 0.4% to Eur4.018 billion in 2009. despite the economic doom and gloom, maintaining an on par result with 2008 is quite an achievement. but if we look at sales numbers for each of the 5 groups, sales numbers were actually down for all except "fashion & leather goods". to look at like for like comparison (ie strip out exchange rate movements, new store openings etc), overall revenue was down 7% with the only exception of "fashion" which went up by 4%.

"watches & jewelry" was unsurprisingly hard hit with a 41% decline in sales. shoppers just stayed away from such high end luxury. reduction in bankers' bonuses, normally handed out in jan/feb, no doubt made an impact in this group's results.

interesting phenomena? crown jewel louis vuitton did well, and press release states that sales were boosted by introduction of new lines such as damier graphite and stephen sprouse tributes. odd, as damier graphite was released in aug 2008, but much of this year's sales was attributed to that.

it now makes economic sense why the stephen sprouse line was introduced in jan this year, rather than to coincide with the holiday season in december. december is traditionally a good month for luxury retail as shoppers get into the festive shopping mood, so delaying the special tribute launch to 2009 would give sales numbers a much needed boost in this difficult retail climate.

ok too much words, lets have a bag from the louis vuitton x stephen sprouse 2009 tribute collection, my little contribution to their 7% increase in 2009 sales numbers:


givenchy was also singled out in their press release, citing that sales were boosted in 2009 by their ready to wear line. so where did the "fashion & leather goods" group made their money from?

impressively, their eggs were very well spread. it was mentioned that their champagne businesses were meant to hedge the cyclical nature of the fashion business. even the geographical spread of their business is well spread and hedged. unsurprisingly, asia is now the biggest revenue region, but sales in europe and america still dominates at 54%.

but that might soon change as Q1 figure suggests that all regions were experiencing negative growth except asia. so quite astoundingly, in the first 3 months of 2009, only the "fashion & leather" goods business recorded growth, and growth was primarily driven by asian market. which in a way isn't that surprising too, as this region is less hit by the economic crisis.

still reading? great! let's have some pictures, of what i think will be key contributors to sales for their next quarter:
the louis vuitton x sofia coppola collaboration

the louis vuitton x kanye west sneakers collaboration

and the phenomenon spring summer 2009 ladies collection which included the runaway success in the form of a spicy sandal.

so how's the share price looking for LVMH? it closed at Eur53 per share yesterday.
comparing the blue line (LVMH) against the red (CAC40 index, performance of france's 40 biggest companies), we can see LVMH consistently outperformed other companies in the group. share price now is at low levels in 2004/5, which i feel still has massive potential to shoot upwards once investors regain confidence in this sector and market as a whole.

so i suggest if one has Eur53 and decides to squander it away on some high street purchase, why not think about acquiring one share in this business.

this is an amazing business, a true leader in every sense. they generated Eur17billion worth of sales last year (that's 38 million speedy bags for you!), it will be very interesting (well, at least for me, and those who managed to read this far!) to see how they steer this ship in current turbulent waters, how they are balancing the need to be commercial yet maintaining the exclusivity associated with luxury retail.

i am so in love with this business. i hope i can be good enough to work for them some day.


source

12 comments:

  1. Loving the detailed post here. I definitely need to look into getting a piece of that action. Well done. I bet you'll be working for them in no time;)

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  2. OMG--oooOOO not only can you SHOP, you can do financial analysis. If I were running LV, I would get you on the speed dial right away. Quite an interesting post, dispells some myths about the market, no? LV will survive this as they did the Depression and the World Wars.

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  3. i am more excited about the LV/sofia coppola collaboration than the kanye sneaker line. sorry 'ye!
    marC

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  4. Analysis representation graphically such a hard job.you did such a fantastic work .it should really helpful for them to boosting their work.well done

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  5. you're such a financial geek. so sexy. lol

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  6. this way too much maths to wrap my little brain with. buy yay for them. we did contribute a few drops in the bucket.

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  7. I was expecting watches and jewelry to expand further but with those number, They may have to rethink on branding them to the right market. And Asia is on top by revenue? LOL.. I'm looking at you China and Philippines!!

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  8. Interesting!!! I think that people want to save money in something strong, with a good value. U, better than anyone, know that a LV's bag can be sold a few years (/months) after more than the original price.

    Funny, i've wrote a post about the Spicy Sandal. If i were a girl, i think that i'll buy one. And i like de Sofia Coppola colection.

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  9. while most of us look into vuitton.com's latest catalogues and flash presentations, you take time to look into the business. i'm impressed.

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  10. thanks guys :D
    buy Buy BUY!

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what's he wearing?