The world’s biggest luxury group LVMH said it was confident it could continue its fast-paced growth after reporting fresh sales and profit records last year driven by booming demand in the US and China.
The conglomerate controlled by billionaire Bernard Arnault also increased its annual dividend to €10 per share, its highest ever payout and two-thirds up on the previous year.
The pandemic proved a shortlived crisis for the group, whose biggest brands Louis Vuitton and Christian Dior have continued to attract affluent shoppers despite store closures and lingering travel restrictions. A gulf has opened between these top brands and smaller independent ones that have lost market share and struggled to keep up in an advertising and ecommerce arms race.
The luxury boom has made LVMH into the biggest listed company in Europe by market capitalisation, and turned Arnault into the second-richest person in the world after Tesla’s Elon Musk, according to Forbes. The 72-year old built the group into a powerhouse through decades of acquisitions. It now include dozens of brands, from Moët champagne to Cheval Blanc high-end hotels.
Annual sales of €64.2bn were ahead of the consensus of €62.5bn, according to FactSet, while net profit of €12bn also beat the €10.9bn analysts had predicted. Organic revenue growth was 36 per cent compared to 2020 and 14 per cent compared to 2019.
“Within the context of a gradual recovery from the health crisis, LVMH is confident in its ability to maintain its current growth momentum,” the group said.
The key driver was LVMH’s fashion and leather goods division, which reached annual sales of €30.9bn last year, or 42 per cent comparable growth from 2019. Operating profit of €12.8bn was more than double the levels achieved only three years ago. Largely thanks to sales of high-margin wallets and handbags, the unit accounts for three-quarters of group operating profit, according to analysts.
It remains to be seen whether such growth rates can be maintained. Investors have begun to worry about the impact of rising interest rates and inflation on the global economy.
As global stock markets have dipped this year, LVMH shares had fallen about 6 per cent before Thursday’s results, while smaller rivals Kering and Hermès were down 8 and 16 per cent respectively. Its forward price-to-earnings ratio of 28.3 is about one-quarter lower than a year ago.
LVMH’s fortunes will depend largely on how consumers in the US and China behave in the coming years.
The pandemic scrambled Chinese buying patterns by shifting spending back to the domestic market because people could no longer travel for shopping trips to Paris or Milan. But young Chinese have kept on shopping for luxury goods and analysts believe LVMH can make further inroads with the growing upper middle classes, despite the Communist government’s threats to crack down on conspicuous consumption.
Meanwhile the US has enjoyed a boom as luxury consumption has become less centred on New York and San Francisco and spread into more middle-sized cities like Austin, Seattle and Miami. The US market now accounts for almost a quarter of LVMH sales, its biggest, and revenue was 25 per cent higher in 2021 than in 2019.
