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Luxury conglomerate LVMH (LVMUY) reported its Q1 2023 results on April 12. All five of its business groups delivered growth in the first quarter. LVMH’s stock rose more than 3% on the news.
While Elon Musk’s baby, Tesla (TSLA), is up nearly 68% year-to-date, more than double Bernard Arnault’s magnificent creation, it has done considerably better than Tesla stock over the past year. Arnault is the world’s wealthiest person for a reason.
Take a close look at LVMH’s latest results. You wouldn’t know that there was a possible recession around the corner.
Fashion Remains LVMH’s Biggest Revenue Driver
As with most European-centric companies, LVMH’s first-quarter results only cover top-line revenue, saving the bottom-line reporting for the end of the first half in July.
Not to worry, the latest results have plenty of exciting information.
First and foremost, its Q1 2023 revenue was 21.04 billion Euros ($23.13 billion), 17% higher than Q1 2022.
“Europe and Japan, which enjoyed strong growth momentum, benefited from robust demand from local customers and international travelers; the United States, a market which continues to grow, had a steady performance. Asia experienced a significant rebound following the lifting of health restrictions,” LVMH stated in its press release.
As stated earlier, all five of its business groups experienced sales growth in the first quarter. Fashion & Leather Goods accounted for 51% of LVMH’s overall revenue. Its sales rose 18% over last year.
During the first quarter, singer Pharrell Williams, who collaborated with the iconic Louis Vuitton brand in 2004 and 2008, was named Men’s Creative Director.
Williams, known by many for his song Happy, from the Despicable Me 2: Original Motion Picture Soundtrack, is also a huge fashion influencer.
“I am glad to welcome Pharrell back home, after our collaborations in 2004 and 2008 for Louis Vuitton, as our new Men’s Creative Director. His creative vision beyond fashion will undoubtedly lead Louis Vuitton towards a new and very exciting chapter,” stated Louis Vuitton CEO Pietro Beccari in the company’s February press release announcing the appointment.
In 2022, the segment generated 49% of the company’s 79.2 billion Euros ($87.1 billion) in overall revenue. Asia is a significant driver of the segment’s growth. Including Japan, Asia accounted for 45% of the segment’s 38.7 billion Euros ($42.5 billion) in revenue.
With a healthy rebound in its Asia business, 2023 could be even more impressive than 2022.
4 of 5 of Its Business Groups Had Double-Digit Revenue Growth
Except for Wines & Spirits (3% growth), every one of its business groups had double-digit revenue growth in the first quarter, led by a 30% year-over-year increase (28% organically) from Selective Retailing, whose businesses include Sephora, DFS Duty-Free, Starboard Cruise Services, and several others. It was the second-highest revenue contributor in the quarter, with 4.0 billion Euros ($4.4 billion), accounting for 19% of LVMH’s overall revenue.
“Sephora saw exceptional performance over the quarter and continued to gain market share. Momentum was particularly strong in North America, Europe and the Middle East. The brand continued to expand its distribution network, particularly in the United Kingdom where, already present online, its first store in London enjoyed an excellent start,” stated its Q1 2023 press release.
It’s hard to believe that Sephora only has one store in the UK. Investors can expect more store openings there in the future. In 2022, the business generated record revenues and profits. Its partnership with Kohl’s (KSS) certainly helped broaden its distribution in the U.S.
Rounding out sales in the first quarter, Perfumes & Cosmetics -- Guerlain, Parfums Christian Dior, Benefit Cosmetics -- had 11% revenue growth (10% organic), with Christian Dior’s perfumes, particularly strong. Meanwhile, Watches & Jewelry -- Tiffany & Co., Bulgari, and Tag Heuer – increased revenues by 11%.
Not a bad result in the bunch.
It’s Not Cheap
Zacks Equity Research recently compared LVMH to PVH (PVH). It was looking to determine the better value between the two stocks. Both have Buy ratings from Zacks due to recent upward earnings estimate revisions. However, based on value metrics such as the P/E and P/B ratios, it concluded that PVH is the better buy.
PVH might be a value play at the moment, but you can’t compare its brands -- Calvin Klein and Tommy Hilfiger -- to the stable of global luxury brands LVMH trots out daily. LVMH’s profit in 2022 was 21.1 billion Euros ($23.2 billion), 2.6x PVH’s revenue for the past year.
There is no comparison.
Of the 28 analysts covering its stock, 24 give it a Buy or Overweight rating, with a median target price of $197.55, slightly above where it’s currently trading. Analysts are being conservative with the target, given the chances of a recession are pretty high. However, they must revise them upwards if we get a soft landing.
Regarding profitable growth, Elon Musk could learn a thing or two from Bernard Arnault and LVMH. As a result, it is a must-own stock for the long haul.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
