LVMH Hit a Market Valuation of 400 Billion Euros and its ATH. Is It Time to Buy LVMH?

As a direct consequence, the market capitalization of the French company surpassed €400 billion ($434 billion) for the first time in its long and illustrious history. On Wednesday, the share price kept rising to reach a new record at €800.80 according to ActivTrades’ data about shares.

Boasting a portfolio of 75 luxury labels including Tiffany & Co., Christian Dior, Louis Vuitton, and Givenchy, LVMH has maintained its status as Europe’s most valuable company since March 2021, and it has now risen to the position of the world’s fourteenth most valuable company.

Meanwhile, the company’s founder, Bernard Arnault, also just overtook Elon Musk as the world’s richest person this past December, after it was reported that Musk was the first person ever to lose $200 billion. At the time of the announcement, Arnault was estimated to be worth over $171 billion (€157.8 billion).

Times have been good for the luxury goods market recently, in contrast to many other retail businesses. Like other companies that have historically had a large chunk of business in China, LVMH has profited from the country’s rapid economic revival from its draconian zero covid policies. However, several experts have warned that sustained share price growth may become more difficult, which begs the question, is LVMH still a decent buy?

Luxury Goods Weathering Economic Headwinds

Luxury goods companies, that typically target wealthy clients, are usually less affected by growing costs and unstable economic conditions like those that have been experienced in 2022. Therefore, in the case of a recession in any of their major marketplaces, they would still have a decent chance of maintaining their main source of demand. Throughout the pandemic and now post-pandemic, demand for quality, high-end products has remained fairly constant as a result.

In times of economic hardship, when customers tend to be more frugal, they may choose to move to more established brands like those that have been around for decades. The promise of quality, distinction, and enduring worth are all implicit in the cost of a luxury item.

More recently, a growing number of consumers in the United States and other countries have also been shopping online for luxury goods in other countries in order to take advantage of the strength of the dollar. This trend has also boosted LVMH’s sales.

For LVMH, the sustained demand of their devoted customers and the recovery of foreign travel contributed to the company’s strong sales performance in Europe, the United States, and Japan last year. As mentioned earlier, the company has also profited from the re-opening of China, since the Asia-Pacific area accounts for around 21 percent of the global luxury goods industry, which is worth a staggering $372 billion.

In October last year, LVMH reported strong third-quarter earnings and implied that the company’s growth continues at the same rate as usual. By the end of the first 9 months of 2022, the company had raked in almost $54.8 billion (€56.5 billion) in sales, an increase of 28% from the same period in 2021. Results for the company’s fourth quarter will be made public on January 26th.

There may still be plenty of room to grow for the industry, as annual market growth is forecasted at 3.47 percent for the global luxury goods market (CAGR 2023-2027) according to statista.com.

Keeping It In the Family

While things have been bubbling along nicely for the luxury goods empire, Chairman and CEO Bernard Arnault also recently reorganized the top management of his company. After recently naming his oldest son, Antoine Arnault, aged 45, to lead the family’s holding business, the corporation has also made several announcements about upcoming changes, effective in February.

He appointed his daughter Delphine, aged 47, to oversee Christian Dior, and named a new head of Louis Vuitton, Pietro Beccari, who had previously led Dior since 2018. These appointments strengthen Bernard Arnault’s family’s control over the business, as all five of his children hold prominent positions in the company.

Alexandre Arnault, aged 30, is in charge of products and communication at Tiffany, while his younger brother Frederic Arnault, aged 28, is the CEO of another group of the company TAG Heuer. Jean Arnault, the youngest child, and current director of marketing and product development for the watches section of Louis Vuitton, is just 24 years old.

Since 1989, Arnault (now aged 73) has served as the company’s Chairman. Although he has not announced who would eventually succeed him publicly, and despite the company having raised the maximum CEO age to 80 from 75, it does seem that he is making long-term moves in the process of his succession planning.

Is LMVH a Buy?

Since the beginning of the year, the share price of the company has climbed by about 16%, and as a result of the strong bull run that has been going on, it is now in a zone where it is considered to be overbought.

This could soon trigger a break or a correction inside this bullish trend, which could present ideal entry points if you feel that the luxury sector will continue to rise this year as a result of the reopening of China and a slowing down in the global tightening of monetary policies.

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