Essay Preview: Lvmh
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The past year has seen LVMHs sales buoyed by favourable economic conditions in two of its key markets – the US and China. Its wine and spirits division saw 12% organic growth for the first nine months of the year, while number of new product launches – such as the Miss Dior Cherie and Dior Addict 2 ranges – enhanced the consumption of its star brands. The groups fragrances and cosmetics division achieved 9% organic growth, while its fashion and leather goods division showed 12% organic growth for the nine-month period, as reinvestment into its smaller brands like Fendi began to deliver results.
More specifically, the company has benefited from strong economic growth in the US, which has led to increased sales of its high-end ranges such as the Hennessy Cognac brand. Indeed, such is the importance of the US market to the group that it recently purchased the rights from Brown-Forman Corporation to import and distribute the Glenmorangie malt scotch brand in the US.
LVMH expects to carry this momentum through to the fourth quarter and see its profits rise significantly from recurring operations over the course of the year. Given the tentative recovery of tourism in Europe as well as continued strong progress in Asia and the US, this prediction could well be on target. Furthermore, the continued resilience of LVMHs brands means it is well positioned to benefit from any upturn in European tourism spending.
Nonetheless, LVMH should beware of banking too much on any one market. Any downturn in US or Chinese consumer spending over the next two years would hit luxury goods manufacturers hard, demonstrating the need to maintain a wide geographical spread. European growth remains slow and LVMH should aim for continued acceleration in sales in this market. Indeed, the groups full-year performance may have more to do with the health of the global economy than the number of new products launched.
Business Description
LVMH is an international group of companies principally engaged in the production and sale of luxury goods under various brand names. The company is active in a number of global markets including the wines and spirits, fashion and leather goods, fragrances and cosmetics, jewelry and selective retailing sectors. LVMH operates about 1,700 stores worldwide.
The companys activities are classified into: wines and spirits; fashion and leather goods; perfumes and cosmetics; watches and jewelry; and selective retailing.
The wines and spirits division produces and markets a range of champagne, sparkling wines, still wines and other beverages. LVMHs internationally recognized champagne brands include Dom Perignon, Moet & Chandon, Ruinart and Veuve Clicquot