Morningstar | Louis Vuitton Continues to Shine as LVMH Delivers 1Q Revenue; Shares Richly Valued
We are maintaining our fair value estimate for wide-moat LVMH as the company reported strong first-quarter revenue. Organic growth in the first quarter was 11% versus our 7.5% full-year expectation. The leather goods and fashion segment was especially strong, reporting organic growth of 15% with continuing strong performance at Louis Vuitton and Christian Dior, which contribute around 70% to the division’s revenue, by our estimates. Organic growth decelerated modestly from 17% in the fourth quarter and displayed a third year in a row of double-digit growth. Our current full-year forecast for 8% growth in this division may be conservative. Growth at the flagship Louis Vuitton brand was driven primarily by volume, with particularly strong performance in smaller ready-to-wear businesses. Strength was notable across nationalities with particular strength with Chinese customers but also double-digit growth with Japanese and American clientele.The perfumes and cosmetics division grew 9% organically (versus our 7% full-year expectation). Wines and spirits also delivered strong growth of 9%, ahead of our 5% organic full-year estimate, affected by restocking. Management guided for a moderation of growth in the business in the quarter to come. Selective retailing grew 8% in the quarter (versus our 6% annual estimate) with market share gains at Sephora and strong performance at Asian duty-free stores. Watches and jewellery was the only weaker performer with 4% organic growth versus our 7% annual expectation, although this was due to a challenging comparison base (20% growth in the first quarter of 2018). Jewellery drove growth with Bulgari growing low double digits while watches lagged. This compares with 2% growth in Swiss watch exports in the first two months of the year.
LVMH Moet Hennessy Louis Vuitton is a manufacturer and retailer of luxury goods. Co. offers champagne and wines, cognac and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelery; and is engaged in selective retailing. Its operations are organized along five business segments: Wine and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelery, and Selective Retailing. Co. is also engaged in other activities (Media with Les Echos group, La Samaritaine and Luxury yacht with Royal Van Lent). Some of Co.'s brands are Moet & Chandon, Dom Perignon, Louis Vuitton, Fendi, Donna Karan, Parfums Christian Dior, Guerlain, Parfums Givenchy, and TAG Heuer.
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