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LVMH MOET HENNESSY LOUIS VUI
LVMH MOET HENNESSY LOUIS VUI
Gorgeous acceleration in Q4
27 Jan 17
LVMH has exerted a tone of confidence in the luxury market through its growth acceleration in Q4. Rather nice organic growth of 8% was reported in the quarter (+9% reported) to reach €11,274m. All segments experienced strong organic performance, led by Selective Retail which grew at a double-digit rate (+11%). Sephora is outperforming all over the world. Wines & Spirits maintained a flat pace of growth compared to the first nine months at 7%. Fashion & Leather products edged up 9% to a record €3,784m, a jump compared to the modest 2% reported in September. Watches & Jewellery soared 8%, while watchmakers are struggling with the deteriorated momentum in the industry. Perfumes & Cosmetics slowed slightly to 7% vs. 8% over the first quarters. In the whole year, sales were up 6% (+5% reported) to reach €37,600m. Retail chains have drawn revenues of €11,973m (+8%). Fashion products’ sales were up 4% to reach €12,775m. By region, favourable momentum was experienced in the three main markets. Strong growth was reported in the US and Europe (+7%), underpinned by a 9% surge in Q4. In France, the decline in tourist inflows reduced sales by 1%. Things turned around in Asia where sales edged up 10% in Q4 (+3% in 9 months) bringing the yearly growth to 5%. The context in Japan remained challenging with 3% lower revenue in 2016. As regards profitability, margins were strongly consolidated with an 8% increasing operating profit to reach €6,904m, i.e. an operating margin of 18.4%. Wines and Fashion Goods generated the bulk of the recurring profit, contributing 76.5%. Both segments stepped up their profits by 10%. Although, Selective Retail’s profit retreated slightly by 2% due to the lagging DFS. Net profit edged up 11% to €3,981m. The financial position strengthened further with 23% lower net debt at €3,265m and 8% higher FCF at €3,974m. LVMH will propose a dividend of €4 per share, i.e. an increase of 13% and a final dividend of €2.6 to be paid in the current year.
The expansion bears fruit amidst a challenging context
11 Oct 16
The world luxury leader impressed once again, outperforming the market with 6% organic growth in Q3 16 to €9,138m. The performance was underpinned by positive momentum experienced by Perfumes & Cosmetics and Selective Retail growing by 10% and 8% respectively. Wines & Spirits slowed to an organic rise of 4% compared to 9% in H1. The Fashion segment accelerated by 5%, while sales were flat in the first half of the year. Watches & Jewellery products maintained the constant growth pace posted in Q2, edging up 2%. Over the first nine months, sales were up 4% (5% organic growth) to reach €26,326m. Perfumes & Cosmetics outperformed with 6% reported growth to €3,578m, i.e. 13.6% of total sales vs. 12.7% by the end of 2015. Both Wines and Selective Retail surged by 5% to reach €3,281m and €8,283m respectively. The spurt in Fashion & Leather goods in Q3 brought the nine-month performance to 1%, to €8,991m. This segment will be enhanced by the German high-end luggage maker Rimowa in 2017. Watches & Jewellery were up 3% to €2,486m. LVMH experienced favourable sales momentum across all regions, even in Asia which posted a significant upturn in Q3. The momentum remains unfavourable in France due to sliding tourist flows. The group has confirmed that its expansion strategy is going ahead in-depth via acquisitions and innovative products as well as in selective promising markets.
Comforting H1 performance
27 Jul 16
The pace of growth in early 2016 was maintained in Q2 amid a challenging global backdrop. Q2 sales grew at a modest 2%, bringing the H1 performance to 3% (€17,188m). Wines & spirits outperformed with a 7% surge to reach €2,056m, boosted by the strong momentum in cognac and spirits (+13% in volume and +10% in value). The core business retreated slightly by 1% to €5,933m despite the good progression of the main brands. All other segments experienced healthy growth (4-5%) with a marked outperformance in perfumes and cosmetics displaying an organic growth of 8%. Watches showed a strong resilience compared to the market, growing at 4% to reach €1,609m. The operating profit remained flat at €2,959m, pulled down by the deteriorating profitability of fashion & leather products, the main contributor to margins, and selective retail. The latter reported a 5% dwindling operating profit to €410m while the core business posted 2% decrease to €1,630m. Wines & spirits impressed with a 17% surge in operating profit to reach €565m. The group’s net profit benefited from lighter currency hedging costs and fewer financial expenses to reach €1,718m (+8%). Geographically, the US market experienced an impressive growth in both quarters bringing the H1 performance to 7% (organic). The market accounts for 26% of total sales. The Asian market (excl. Japan) reported a favourable momentum in Q2 increasing by 3% (-2% in Q1), although sales in Japan turned down (-5%) after a rise of 6% in Q1. Asia is still the main contributor to sales, accounting for 35%, of which 7% in Japan. Europe’s performance slowed down to 3% in Q2, i.e. growth of 5% in the first six months. Its contribution was reduced to 27% of which 10% in the home market. The strength of the financial structure was confirmed again with a drop in net debt of 12% yoy (€5,303m). Gearing was reduced to 16.9% vs. 19.8% a year earlier. The operating cash flow was consolidated from €1,494m in H1 15 to €1,632m in H1 16. The half year FCF gained €83m to reach €761m. An interim dividend of €1.4 will be paid in December 2016.
Healthy growth in Q1
13 Apr 16
LVMH experienced a rather shy quarter marked by the lacklustre demand for luxury fashion goods. Sales increased by 4%, of which organic growth of 3%, to reach €8,620m. Perfumes & Cosmetics outperformed with 9% lfl growth (€1,213m). Watches & Jewellery did better than the market and surged by 7% to €774m. The Wines & Spirits division grew by 6%, to €1,033m. The group’s performance was pulled down by the poor growth posted by the two largest contributors to sales as the fashion segment recorded flat sales at €2,965m and selective retail increased by 4% to €2,747m. Structural growth was nil for all segments. Geographically, LVMH experienced healthy growth (6-7%) in all regions except for Asia which retreated by 2% on an lfl basis. This latter accounted for 37% of Q1 sales compared to 26% in Europe (9% in France) and 25% in the USA.
FY15 results, beyond Chinese worries
04 Feb 16
LVMH outperformed all expectations posting 16% FY15 sales’ growth within a general economic slowdown, to €35.7bn. The organic growth was limited to 6% which is a strong figure in an industry expected to slowdown. The revenues benefited from the positive forex impact and the strengthening US$, as 32% of 2015 sales are invoiced in $. The underlying operating profit was up by 16%, worth €6.6bn, generating a net profit of €3,573m, i.e. 20% increase on a constant base. The selective retail impressed with 18% sales’ rise to €11.2bn boosted by an exceptional progress of Sephora. The core business, Fashion and leather goods grew by 14%. All segments posted significant profit growths pulled up by a 19% increase for Wines & Spirits and 10% for Fashion goods. The financial structure strengthened with ballooning FCF up by 30% and net debt decreasing by 12%. The proposed annual dividend is at €3.55, up by 11% compared to 2014.
Outperformance in the bag
24 Mar 17
IG Design has had a very good second half trading and has issued a year-end update indicating that numbers will exceed market estimates. We have lifted our FY17 and FY18 numbers by 8-10% at the pre-tax and EPS levels, following an 11% uplift to earnings with the interims. Particularly notable is the comment on strong cash flow, with the group reaching its target of average leverage less than 2.5x EBITDA two years ahead of plan. With the earnings and cash flow momentum, strong balance sheet and progressive dividend, there is good potential for further share price upside.
24 Mar 17
We note the share transaction yesterday, and think the stock will benefit from the increased liquidity. We continue to believe there is good valuation upside to the shares. However, we are terminating coverage of Watkins Jones from this morning and withdrawing our forecasts from the market.
Management hopes for a better 2017
21 Mar 17
BMW’s final 2016 accounts were, compared to what we had anticipated, slightly disappointing. We had said so when preliminary numbers were released earlier this month. Today’s guidance for 2017 shows slight growth in all categories, i.e. volume, revenue and consolidated pre-tax earnings are all projected to go up. Reading between the lines, the statement suggests that the EBIT margin generated by the Automobiles division is likely to fall further (it was down from 9.2% to 8.9% in 2016). Whether Financial Services can again increase its margin (it was up by 0.1pp to 8.4% last year) remains to be seen and will also depend on the price development of used vehicles.
The Slide Rule
12 Jan 17
What is The Slide Rule? The Slide Rule has been designed to dramatically simplify the identification of the best companies in the UK small/mid-cap sector by making a quantitative assessment of the relative potential of each company. At its core, The Slide Rule aims to identify those companies that create genuine shareholder value through strong returns on capital and solid growth, but also present a value opportunity with the potential tailwind of earnings momentum. Companies are assessed within a Quality, Value, Growth and Momentum (QVGM) framework.