LVMH Double Growth In Revenue And Net Profit?

Becoming the next LVMH is almost all luxury group's dream.

But LVMH, who believes in Matthew effect, doesn't give mobile phones.

In the earnings report released in January 30th, the global luxury goods giant LVMH group handed in a brilliant report card. In 2018, both the total revenue and net profit recorded a strong two digit growth.

At the moment of slowing global economic growth, the fashion empire used "buy and buy" to build moat, and tried to compete against its rivals with young faces.

01

Billion club

Throughout the year, LVMH can have a good student's certificate.

On Tuesday, LVMH released its 2018 financial report, which reported that the group achieved total sales of 46 billion 820 million euros in the past year, an increase of 10% over the previous year, a record high, a net profit of 6 billion 350 million euros, an increase of 18% over 2017, and a 21% increase in operating profit, reaching 10 billion euros, basically in line with analysts' expectations.

Fashion leather Department is the leader.

According to the financial report, in the fourth quarter of last year, the fashion leather Department continued to rise in the market driven by the core brand Louis Vuitton, an increase of up to 17%, contributing 39% of sales to 5 billion 400 million euros. Last year, the sales volume of the Department registered a 15% increase of 18 billion 455 million euros, which has maintained a two digit growth for 9 consecutive quarters.

The rest of the departments also showed a steady upward trend.

The annual sales volume of watches and jewellery departments increased by 12% to 4 billion 123 million euros compared with the previous year, while operating profits soared 37% to 703 million euros; the sales of perfume and cosmetics sector increased by 14% to 6 billion 92 million euros, operating profit increased 13% last year, reaching 676 million euros, and the selected retail sector, including Sephora, achieved 13 billion 646 million euro sales, an increase of 6% over the same period last year; the smallest increase in profit margin for liquor business was 5%.

"Whether it is revenue or profit, the group set a new record in 2018." in the face of financial reports, LVMH chairman and CEO Bernard Arnault can not help but sell themselves, claiming that business profits have broken into the 10 billion euro club successfully, which means that LVMH's brand creativity and quality are both attractive to consumers.

LVMH may be a gift to the Asian market.

From the regional distribution of sales, Asian market contributed 36% of the total revenue. Even excluding Japan, sales accounted for 29%, accounting for three consecutive years of increase.

This contrasts with the cooling US market, with sales falling from 27% in 2016 to 24% in 2018.

LVMH was also generous after absorbing gold.

It is expected to announce a 20% dividend increase of 6 euros per share at the shareholders' meeting this April 18th.

In December last year, LVMH issued an interim dividend of 2 euros per share to shareholders.

The 4 Euro balance will be paid by the end of April this year.

02

Luxury recovery

The South Korean canary has warned the global economy and the market for luxury goods has been dusty.

In January 18th, the US jewellery brand Tiffany announced a holiday performance report, showing that global net sales fell 1% year-on-year in the two months to December 31, 2018, and the sales of engagement series and Designer Series decreased by 3% and 8% respectively.

McKinsey has predicted that the growth rate of the 2019 global fashion industry will slow down to 3.5%-4.5%.

After Apple lowered its revenue forecast for the first quarter of 2019, Bloomberg began to worry about LVMH, which relies on high consumer groups.

"Apple's sales decline will trigger a chain reaction in the global market. LVMH may become the next company to encounter" Waterloo ", Bloomberg said, because a large number of luxury goods companies rely on customers and customers who like to buy Apple's latest products.

However, LVMH has proved itself by data, and also let the market of the deteriorating luxury industry take a breath.

"The market thinks the cup is half empty, but in my opinion, the cup is half full."

Jean-Jacques Guiony, chief financial officer of LVMH, disagrees with the concerns of the outside world, saying that although sales in the Chinese market have shifted slightly to other Asian markets, no obvious signs of slowing down have been seen. On the contrary, the growth of Chinese consumer spending on most brands in the fourth quarter has reached two digits.

In an interview with the financial times, Guiony said luxury consumers tend to be influenced by sudden shocks, and that the long-term changes like economic slowdown are not so great.

"We see that the global luxury market has recovered healthfully last year."

Bain partners Claudia D 'Arpizio said that in November last year, Bain and the Italy luxury industry association jointly released the annual Luxury Market Research Report, which shows that in 2018, according to the constant exchange rate, including luxury products and experience, the global luxury goods industry grew by an overall size of 5%, estimated at 1 trillion and 200 billion euros, and the overall performance of each sector was good, and the individual luxury sector won the whole market.

In response, Lu Shengzhen, a marketing expert, told the Beijing Commercial Daily reporters that for high-income earners, the main reason is not lack of consumption funds but lack of capital funds, so even if the economy is not good, it will not affect the consumption of luxury goods.

Because of the pursuit of quality and life symbolism, some special populations have a relatively stable demand for luxury goods. Most of the consumers are influenced by the economy and have little influence on the consumers.

03

Multi brand matrix

"Entering 2019 with prudent confidence" is LVMH's expectation for the future.

LVMH said in its earnings report that the group is capable of maintaining all business growth this year, but frankly, there is uncertainty in the future market.

However, LVMH's recent performance has not been prudent, and has continued to boldly exploit the "buy and buy" style.

In January 20th, according to WWD, LVMH will launch a new luxury brand with the American hip-hop singer Rihanna. The product will cover many categories of garments, leather goods and accessories. This will be the first venture brand of LVMH since 1987.

At the end of last year, LVMH bought the luxury travel brand Belmond for $2 billion 600 million.

Someone's comment on Bernard Arnault is that "as long as you see a beautiful brand, he wants to get his income."

The multi brand matrix constructs a LVMH wide moat.

According to data from consulting firm Alacrastore, LVMH group has made 62 acquisitions since 1987, holding 74 companies.

This is understandable. Forbes has said that by 2025, the luxury brands will compete across traditional fields. The brand development mode is either to focus on one category as an expert, or to diversify brand positioning.

For the way of "buy and buy" expansion, Lu Sheng Zhen said that relying on mergers and acquisitions can save market and product development costs. It is a means of capital expansion, which is a common market means and does not affect the luxury brand itself.

The only limitation is that the expansion is too fast, which will lower the sense of luxury.

In fact, LVMH buys and buys from the anxiety of keeping the luxuries throne.

In the third quarter of last year, sales rose 27.6% to 3 billion 400 million euros in the first quarter of last year, and sales increased by 31.5% to 9 billion 526 million euros in the first 9 months of the year. Gucci, the cash cow, was the leader of the group.

Gucci's third quarter sales surged 35.1% to 2 billion 100 million euros, leading the luxury industry for 11 consecutive quarters.

The chairman and CEO Fran ois-Henri Pinault of Kai Yun group is a popular saying that it will "destroy" Louis Vuitton, making Gucci the world's largest luxury brand.

In addition to covetous opponents, LVMH also faces the younger generation, the "Z generation" of the younger consumption trend.

To this end, over 100 years old LVMH also had to let themselves move, in 2018, bought a box of high-end luxury suitcase brand Rimowa, shoes trading platform Stadium Goods, and injected into the fashion business Lyst.

Lu Shengzhen believes that youth is a way to create a brand atmosphere, the more people follow the pursuit of the brand, the higher the premium.

Being younger is just a sign that luxury brands have a sense of quality, but they also have a sense of fashion.

But luxury goods still rely on consumers who have relatively strong purchasing power, which is not to cater to all young consumers, but rather to stick some young people with relatively high purchasing power.

Luxury brands have specific brand playing methods, and they still rely on consumers who have relatively strong purchasing power.