LVMH Drives Luxury to High End of Market -- WSJ
08 Novembre 2019 - 9:02AM
Dow Jones News
By Matthew Dalton
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 8, 2019).
PARIS -- 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 EUR200 billion ($222 billion)
for the first time, making it almost as valuable as Europe's
biggest oil producer, Royal Dutch Shell PLC.
LVMH isn't the only stock-market star in the luxury business:
The share prices of two of LVMH's smaller rivals, Kering SA and
Hermès International SA, have also soared over the past two
years.
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, whose fast-rising incomes have made them the
luxury industry's most important customers. But the three companies
are selling strongly to Americans and Europeans as well.
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.
Tiffany has said it is reviewing the offer and that no discussions
have taken place.
"As long as global market conditions support a larger and larger
audience of consumers who are interested in and capable of buying
luxury goods, LVMH is in a great position," said Luca Solca, an
analyst at Bernstein & Co.
Kering has been powered by Gucci, one of the hottest brands in
fashion over the past three years. Hermès relies almost exclusively
on its lines of handbags, which can retail for more than $10,000
each. LVMH, Kering and Hermès occupy three of the top seven spots
by market cap on the CAC-40, France's main stock index, ahead of
BNP Paribas, France's largest bank, and AXA SA, the country's
largest insurer.
The industry's good fortunes have been far from evenly
distributed. Outside those three, high-end fashion companies such
as Prada SpA and Burberry Group PLC have struggled to rejuvenate
their brands. The fashion conglomerates appear to have gained an
advantage compared with single-brand houses because their labels
can share know-how and pool costs in areas such as marketing,
logistics and real estate.
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.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
Corrections & Amplifications LVMH, Kering and Hermès occupy
three of the top seven spots by market cap on the CAC-40, France's
main stock index. An earlier version of this article incorrectly
identified the three companies as LVMH, Kering and Gucci. (Nov. 7,
2019)
(END) Dow Jones Newswires
November 08, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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