French billionaire Bernard Arnault is walking and has plenty of reasons to keep smiling from ear to ear. Arno, better known as the Wolf of Cashmere, would have left Elon Musk in the dust at the start of the year, when he established himself as the world’s only billionaire. Indeed, it is true. Now, as usual, the good news comes from LVMH, the French-owned luxury goods giant.
The parent company of Louis Vuitton, Moët & Chandon and Hennessy on Monday became the first European company to reach a market capitalization of $500 billion.
The move follows a strong appreciation in shares of LVMH, which also owns brands such as Givenchy, Bulgari, Tiffany and Sephora.
The valuation was triggered by a 17% increase in conglomerate sales in the first quarter of 2023, far exceeding analyst expectations.
LVMH stock has now reached a new all-time high after the company reported revenues of 79.2 billion euros ($87.1 billion) in consolidated data for 2022.
Income from recurring operations reached €21.1 billion, the second consecutive year of record results.
What is good can get better for Louis Vuitton
LVMH CEO Bernard Arnault is currently the richest person in the world. According to Bloomberg’s daily ranking, Cashmere Wolf’s net worth was $212 billion on Monday.
Much of this wealth is derived from LVMH shares. But what is good for Bernard Arnault can still be improved upon.
The Paris-based company believes it will benefit from the reopening of the economy in China, where the resumption of travel is expected to bring back high-income consumers.
However, LVMH should not be the only beneficiary of this move.
Expectations of a recovery in Chinese consumer spending are also boosting stock prices in other luxury groups such as Richemont, Kering and Burberry.
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The luxury goods market is a safe haven in times of volatility
The truth is, common sense can lead us to question the ability of luxury brands to withstand crises.
But there’s a logical reason for companies like those that make up LVMH’s portfolio not only to endure, but also to thrive in turbulent times like the current one.
Marc Schartz, European Equity Portfolio Manager at Janus Henderson Investors, points out some characteristics these brands have in common. Among these factors are high entry barriers, short supply and little price divergence.
“These three points are more or less obvious when looking at the different brands, but they generally explain why the luxury space often serves as a safe haven in times of economic volatility,” Schartz explained.
However, according to him, established brands are unlikely to be replaced. In addition, market power prevents profit margins from being compressed during periods of inflation, as the high-income public is usually protected.
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