LVMH released their sales and revenue for Q317 and once again they smashed estimates.

Having gone through our model, we increased the price target from €225 to €255.

About the Group

LVMH Moët Hennessy Louis Vuitton SE, better known as LVMH, is a French multinational luxury goods conglomerate, native of France and headquartered in Paris. Christian Dior, the luxury goods group, is the main holding company of LVMH, owning 40.9% of its shares, and 59.01% of its voting rights.

Investment rationale below:

  • The shares have clearly outperformed the market this year given the positive outlook on the Group and sector. Year-to-date, LVMH shares are up 34% compared to the CAC Index which is up 14%. This is an outperformance of 20%.
  • We expect the Group to continue generating an EBIT margin of between 19-20% in the coming years
  • LVMH 3Q sales delivered a beat across the board. We expect 2017 and beyond to remain positive for the Group
  • Don’t forget this Group outperformed even during the Asian crisis when retail was getting slaughtered due to concerns China was slowing down. LVMH was still managing to outperform consensus
  • All brands within the group are well known brands doing exceptionally well
  • What was truly impressive though is that ALL divisions continue to register strong growth. The strength of all group businesses continues to drive outperformance in all key categories:
  • Wines & Spirits Q3 17: 4% organic growth
  • Fashion & Leather Goods Q3 17: 13% organic growth
  • Perfume & Cosmetics Q3 17: 17% organic growth
  • Watches & Jewellery Q3 17: 14% organic growth
  • Selective retailing Q3 17: 14% organic growth
  • Other analysts are also increasing their price target on this stock given the strength of this company
  • Management is going through a cost cutting exercise which should improve margins going forward
  • LVMH is well positioned to benefit from improved economic conditions

Concerns

  • Cognac was the weakest part driven by supply constraints as the group has warned all year
  • The group also indicated that the trends currently being observed ‘cannot reasonably be extrapolated for the full year’
  • Geopolitical risks

Conclusion

These figures reported are much better than we expected. Impressively all divisions continue to report strong growth figures. We expect Fashion & Leather Goods to be the main focus in 2017. If global economic growth continues picking up, LVMH will continue outperforming the market.