France's Luxury Giant LVMH Soars 60%

By Pisit.Sj @ Shutterstock.com

Last year, after a weak third quarter, investors were looking for any reason to sell LVMH. I, on the other hand, told you that luxury like that at LVMH never goes out of style. My twice-a-year on-the-ground intelligence gathering trips in France always include visits to LVMH retail locations in Paris. There’s no better way to take the pulse of the world luxury goods market than seeing it firsthand.

Now, as you can see in my chart below, investors have caught up to LVMH, making it one of the most valuable companies in Europe. The WSJ reports:

LVMH has been by far the luxury industry’s best performer this year, with its shares up nearly 60%.

Revenue rose 16% in the first nine months of the year, as LVMH brushed aside threats from protests in Hong Kong and trade tensions between Beijing and Washington. The share-price increase has put LVMH’s market cap on par with Coca-Cola Co. and Boeing Co.

Selling handbags, cognac and designer fashion, LVMH Moët Hennessy Louis Vuitton SE has become one of the most valuable companies in Europe.

Its shares are worth more than Europe’s biggest auto maker, Volkswagen AG , and biggest bank, HSBC Holdings PLC. This week, LVMH’s market capitalization topped €200 billion ($222 billion) for the first time, making it almost as valuable as Europe’s biggest oil producer, Royal Dutch Shell PLC.

The shift in stock-market fortunes is a sign of how the luxury business is eclipsing sectors that were once at the core of the European economy. Banks are struggling to adapt to new post-financial-crisis regulations. Auto makers face declining car sales. Big oil companies are subject to the whims of turbulent oil and natural-gas markets.

But LVMH, Kering and Hermès are enjoying a strong tailwind: steady growth in the number of customers around the world who want to own a piece of European heritage. The growth has been strongest among the Chinese,

LVMH, which owns 75 brands, has created a mass market for luxury by selling goods with a wide range of prices that can attract consumers who vary in age and income. Louis Vuitton, which by some estimates accounts for one-quarter of LVMH’s sales and half of its operating profit, sells leather goods starting at a few hundred dollars in more than 450 stores world-wide. A bottle of Hennessy Cognac sells for as little as $25. Sephora cosmetics boutiques are in malls across the U.S.

Now the conglomerate aims to add engagement rings in blue boxes to its offering. This month it decided to use some of the cash it accumulated during the luxury boom to make a bid for Tiffany & Co., the American jeweler. At $14.5 billion, it would be the biggest acquisition yet by Bernard Arnault, the French billionaire who is the chief executive and controlling shareholder of LVMH.