Louis Vuitton Moët Hennessy
Company Analysis & Investment Recommendation
Keshia Mae Jeantel
Professor Mark Hannan- Dan Berkout
BADM 2003W- Analysis of Business Issues
5 December 2012
Keshia Mae Jeantel
Executive Summary
LVMH Moët Hennessy Ÿ Louis Vuitton S.A. is a luxury goods conglomerate worth investing in.
Founded in 1987 with a merger between Louis Vuitton and Moët Hennessy, the company has
sustained several years of high growth and profitability. As of 2011, the company had a store
network of 2,423 stores across the US, Europe, Asia and other markets. The company employs
more than 75,000 people and is headquartered in Paris, France.
Its portfolio boasts over 60 prestigious brands in the following categories: fashion and leather
goods, watches and jewelry, wines and spirits, publishing and media, perfumes and cosmetics,
and selective retailing. Some of the brands include: Donna Karan and Marc Jacobs, Louis
Vuitton, Bvlgari, Moët and Chandon, Veuve Cliquot, Hennessy, Parfums Christian Dior, and
Sephora. All of the products sold under the LVMH brand are high quality goods that represent
status, elegance, and wealth. Therefore, the target audience is comprised of well to do individuals
with high disposable incomes. Demographics of this target audience have some variability based
on cultural differences in different geographical locations. The target audience is relatively
focused because certain individuals can afford and are attracted to the premium priced items.
LVMH is differentiated from the competition for several reasons. Some of these include strong
leadership, a well-developed and strong brand, and a focus on both tradition and innovation. The
company’s goals are to continue to diversify its source of revenue and to ensure each individual
brand falls in line with the overriding corporate brand personality. These are ongoing goals that
have been designed by CEO and Chairman Bernard Arnault. The broad nature of the goals gives
the company much leeway in how it achieves them.
LVMH’s sales have continued to increase. The brands show resilience to the economic climate
of the world, as sales and profit have not faltered. In 2011, the brand’s value was €18.4 billion
and had increased by 23 percent from 2010. Half-year reports and forecasts from analysts
indicate LVMH will surpass projections for the 2012 fiscal year.
Investment in LVMH is highly recommended. The company proves to be sustainable and highly
profitable over extended periods of time, is the global leader in its industry, maintains stability in
the wake of constant innovation, and has secured a loyal customer base that continues to grow.
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Table of Contents
Executive Summary 2 Introduction and Statement of Purpose 4 Qualitative Analysis Porter’s Five Forces of Competition Corporate and Business Level Strategy Vision and Leadership Culture and Brand Position Potential Threats 4 5 6 6 7 8 Quantitative Financial Analysis Three-Year Company Financial Trend Analysis Competition and Industry Comparison (Ratios)* Profitability 8 8 9 9 Recommendations 9 Appendices 12 Works Cited 19 3 Keshia Mae Jeantel
Introduction and Statement of Purpose
The purpose of this research paper is to provide an in depth qualitative and quantitative analysis
of LVMH Moët Hennessy Ÿ Louis Vuitton S.A. to serve as a comprehensive guide for
recommendations on investing in the luxury goods group.
LVMH Moët Hennessy Ÿ Louis Vuitton S.A., or LVMH, is a Paris based luxury goods
conglomerate, the world’s largest luxury brands company. It was formed in 1987 with the merger
of Moët Hennessy and Louis Vuitton. Some of the companies that fall under the parent brand
have history that runs as deep back as 1593. The goods all fall under the luxury classification and
include champagne, spirits, leather goods, perfumes, cosmetics, and fashions (FAQ Historical
Background). The merger was a $4 billion venture and created LVMH as parent to over 60
companies that manage prestigious brands.
The Chairman and CEO of LVMH is Bernard Arnault. He is the owner and Chairman of
Christian Dior which is the main holding company of LVMH (FAQ Historical Background). A
breakdown of his principal holdings can be found in the appendix, figure 1 and 2. Christian Dior
owns 42.38% of LVMH’s shares and the majority of its voting rights, 59.3% (LVMH Moet
Hennessy). Much of LVMH’s success can be attributed to Arnault’s leadership, creativity, and
transformation ability. The company is a leader in its industry; its high level of quality and
workmanship in all subsidiaries is unparalleled. Despite the economic downturn, LVMH has
been able to show much growth in its sales (Sage). What makes LVMH very unique is that its
constant innovation and focus on design matches its rich history.
Through analysis of qualitative and quantitative information with use of secondary data and
financial reports, the research will give an in depth overview of the strengths, weaknesses,
opportunities and threats associated with the LVMH group. To do this, the paper will begin by
focusing on an industry analysis using Porter’s five forces to identify LVMH’s position in the
industry. Then, the paper will delve into LVMH with a focus on assessing the LVMH vision, its
leadership, the company culture, and marketing strategies. The qualitative analysis will conclude
with discussing possible problems the company may face. The quantitative analysis will use
pertinent information from financial reports from the past three years as well as financial ratios
that will help provide a basis for evaluating the company’s long term profitability and viability as
an investment. The research paper will conclude with recommendations for moving forward.
Using criteria like stability, company innovation in industry and marketplace, and unique factors,
the paper will provide recommendations for investment in LVMH.
Qualitative Analysis
To provide a comprehensive analysis of Louis Vuitton’s strengths, weaknesses, opportunities
and threats, this section of the company analysis will included an assessment of the luxury goods
industry using Porter’s five and an evaluation of Louis Vuitton’s corporate and business level
4 Keshia Mae Jeantel
strategy. The section will also consider LVMH’s vision and leadership, culture, brand position
and revel some potential threats.
In 2012, Louis Vuitton toped Interbrand’s list of the Top 100 Brands. It’s position? Seventeen,
up one level from 2011 and the highest in its industry. The site reported, “Louis Vuitton reports
19 percent growth in revenue over the past year and still remains the strongest luxury brand in
the world.” Owning Louis Vuitton products symbolizes luxury and success and although the
brand faces competition in Asia, it continues to grow in its leather goods, watch collection,
fragrances and has focused on better positioning in social media. It also continues to open
luxurious flagship stores across the world (Best Global Brands 2011). Figure 3 depicts how
Louis Vuitton’s brand value has steadily increased since 2004 and at much higher rates than the
also graphed luxury sector (Interbrand - Best Global Brands 2012 - Louis Vuitton).
Understanding the intensity of competition in the luxury goods sector can help to reveal where
Louis Vuitton’s competitive advantages are and how they are able to exploit them.
Porter’s Five Forces of Competition
Porter’s Five Forces identify five forces of competition to analyze an industry and can be used as
a tool to assess a company’s position in its industry. These five forces include potential entrants,
suppliers, buyers, industry competition (rivalry), and substitutes. Assessing barriers to entry and
exit can explore the threat of potential entrants. For a company in the luxury goods sector, there
are four high barriers to entry: economies of scale, differentiation, unrecoverable expenses, and
access to unique factors. Other mentionable barriers to entry into the industry include patents,
total capital requirements, patents, and learning curves. Old players in this industry have the
advantage as they have access to cumulative knowledge and volume over time, have identified a
niche and sustained brand loyalty within their target market, have a cost advantage over old
players, and have specialized and sophisticated research and development and marketing. Much
of these advantages yield to high expenses that are unique to the industry, if a company is not
successful in this industry they will lose a significant amount of money in research and
development and advertising, let alone all of the other expenses incurred. Large sums of capital
must be invested in order to be successful in this industry. Barriers to exit are low to moderate in
the industry. Specialized assets can be sold to competitors, there are no fixed costs of exit, and
contractual commitment is relative to the company. Management commitments are relatively
high as many luxury brands are family owned and run. This combination of high entry barriers
and low exit barriers yields high stable returns (Cook). While the industry does continue to show
high stable returns, LVMH continues to outperform its competitors significantly. Rivalry, the
degree of competition in an industry, is relatively low. There is high concentration in the industry
meaning there are just a few players. Differentiation and growth rate are high, and diverse
competitors are diplomatic. All of these factors signify a low rivalry industry. In the industry,
several stores own flagship stores or adopt the store in store strategy effectively reducing the
need for retailers, or the buyer. Because of this vertical integration, buyer power is low. In this
industry, companies also have power to be selective in where they sell their goods. It is more
difficult to evaluate the negotiating power that suppliers have since this industry has a very high
differentiation in product type. Securing high quality raw materials is essential and goes give
some power to the supplier. Finally, there are an infinite amount of substitutes for these goods
5 Keshia Mae Jeantel
outside of the luxury goods sector. Consumers can sacrifice quality and status for price and
availability. However, since luxury goods are so highly differential, they do not experience price
ceilings and consumers with high disposable incomes are willing to make the investment.
Porter’s five shows that the luxury goods industry is very distinctive sector with global
capabilities. As an old player with a highly differentiated product line, LVMH is able to
capitalize on the industry’s strategic position, further analysis of its corporate and business level
strategy reveals the company’s competitive advantages and core competencies that sets it apart
from the competition.
Corporate and Business Level Strategy
Louis Vuitton Moët Hennessey’s corporate strategy is a conglomerate diversification with
business lines in fashion and leather goods, watches and jewelry, perfumes, wines and spirits,
retail stores and more. While in recent years conglomerates have not been able to sustain highlevel performance, LVMH has because its businesses are not so dissimilar that management
logic and performance measures won’t stretch. LVMH’s competitive advantages are what set it
apart from the competition. One source of Louis Vuitton’s strategic capabilities is in its brand
names, reputation, and marketing know-how. The company is able to avoid competitors by
securing a niche and is able to outperform competitors because of their focused differentiation
strategy. Within this strategy, LVMH is able to price their items at a premium, give consumers
products with superior quality, prestige, and exclusivity, and invest in rapid innovation and high
customer service. LVMH can then mitigate buyer power and the ability of substitutes to take
business because customer sensitivity to price increases is low and consumers stay brand loyal.
Vision and Leadership
LVMH’s website states the following as their mission statement,
“The mission of the LVMH group is to represent the most refined qualities of Western
‘Art de Vivre’ around the world. LVMH must continue to be synonymous with both
elegance and creativity. Our products, and the cultural values they embody, blend
tradition and innovation, and kindle dream and fantasy.” (The Group)
LVMH works hard to ensure all of their products fall under of this mission of representing an
acute combination of elegance and creativity, blending tradition and innovation, and kindling
dream and fantasy. The mission serves a backbone to all of the business lines, contributing to the
relatedness nature of its corporate and business strategy. The group cites five priorities in relation
to their mission: be creative and innovative, aim for product excellence, bolster the image of
their brands with passionate determination, act as entrepreneurs, and strive to be the best in all
they do. These priorities ensure the cohesiveness that LVMH shows even with its diverse
portfolio. Long-term success is rooted in the combination of artistic creativity and technological
innovation, the perfection of products through traditional craftsmanship, the intolerance of
anything less than excellent, the fostering of exceptional reputation and stringent control of brand
image, the decentralized organizational structure, and the ambition to be the very best.
One of LVMH’s key strategic advantages is in its strong leadership. Chairman Bernard Arnault
has spent over 25 years helping to build LVMH from a small, nearly defunct clothing
manufacturer to a conglomerate comprising approximately 60 of the world’s most powerful
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brands (Arnault). His style of leadership and management focuses on the limitless and radical
innovation. He believes in pushing the envelope, thinking completely outside the box, and that
there is no room for financial and commercial concerns at any stage of production, especially the
creative process. His management style stresses a decentralized organizational structure because
he feels it fosters efficiency, productivity, creativity, and dynamic motivation. Each individual
brand is responsible to infuse an entrepreneurial spirit in their operations (The Group). Quality
and attention to detail has afforded the company sustained success. There is strict discipline in
complete control in manufacturing processes and meticulous planning. Arnault has a strong
resolve that is a driving force in the company’s success. In an interview, with Harvard Business
Review, his answers inherently reflect the LVMH mission. When asked how the company
responds to the marketplace in the creative process he is quoted as saying, “You can’t charge a
premium price for giving people what they expect, and you won’t ever have break-out products
that way—the kinds of products that people line up around the block for. We have those, but
only because we give our artists freedom.” (Arnault) His main strategy is to trust creators and to
strike a balance between the classics and the new and innovative, in fact, only 15% of profits
come from new products, most of it comes from the traditional products consumers have grown
to love. He has a great track record in purchasing large and almost defunct companies and
turning them into profitable powerhouses, i.e. Christian Dior, Celine, and Sephora (The Empire
of Demise). To develop a sustainable and lucrative brand, Arnault identifies four characteristics:
timeless, modern, fast growing, and highly profitable, a strategy he has perfected and that is not
easily duplicated across the marketplace (Arnault).
Culture and Brand Position
LVMH Moët Hennessy Ÿ Louis Vuitton S.A. has a well-established culture and brand position.
The group has a commitment to environment and philanthropy, revealing its culture and level of
corporate social responsibility. Under the environment value, Louis Vuitton follows the 5 Rs:
recycle, reduce, review, repair and renew. Within this capacity there is a focus on the greater
environment and reducing the company’s carbon footprint. The group also uses environment as
an opportunity to integrate environmental innovation and creativity (LVMH and the
Environment). The group has over 100,000 employees that join an “ecosystem” that is described
as fascinating, passionate, stimulating, and meaningful. This “ecosystem” represents a slew of
métiers: create and innovate produce and achieve excellence, sell and develop, manage and
support. The group encourages functional and geographic mobility, holds effective talent
development and training as a necessity, and has a commitment to diversity.
Branding positioning for a luxury conglomerate could be difficult, however LVMH does an
exceptional job in focusing on each individual brand’s positioning but also ensuring it is
cohesive with the LVMH group brand. The development of the corporate brand is done to
address needs of investors, employees, and other stakeholders. The development of the
individual brands and their positioning adheres to the consumer. To maintain both facets of the
brand message, each individual brand has to have its own established brand message and
personality however, whatever this is, it must reflect the luxury quality of the goods or services
(Okonokwo, 116-118). For example, when purchasing any product from a LVMH group brand,
consumers are buying into much more than a tangible product, they are buying into an
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experience, a culture, and a prestigious lifestyle, representing the corporate brand’s position.
When specifically purchasing a Louis Vuitton product, the LV symbols and monogram represent
the individual brand’s identity and personality. The company burns remaining inventory at year’s
end to maintain the value of their products and ensure they never go on sale, preserving the value
to consumer, representing the individual brand’s position. Striking the balance between the
group’s brand and each subsidiary’s brand gives the group the opportunity to control pricing,
marketing, and other significant factors.
Potential Threats
It is important to note some possible problems LVMH may face. Much of the group’s success
has been due to the dynamic leadership of Chairman and CEO, Bernard Arnault. Losing him as a
leader due to health or death could leave the group susceptible to reorganization of management
by a new figurehead. Arnault should be grooming a successor in case an unforeseeable tragedy
occurs that forces him out that can continue to take the group in the direction that has given it
such success. Other issues include dealing with creatives, which has proved to be a challenge.
Just this past year, Arnault had to make the decision to fire John Galliano, Former Creative
Director at Christian Dior for making anti-Semitic remarks, going against the group’s mission
and values (Phelan). Firing him showed that the company would not tolerate insubordination,
however, the split became very public. There are reports Galliano sued Christian Dior over an
employee/employer dispute for over $18 million and Arnault’s son has been quoted as saying,
“towards the end, my father just couldn’t talk to John Galliano at all, it was impossible- he
wouldn’t listen to anything. At that point, it crashes” (Mau). Controversy like these can severely
dilute shareholder value and deteriorate interest. Furthermore, the luxury goods industry can
come under attack by several adversaries, one being animal rights groups and another counterfeit
products. In the wake of economic downturns, there is the threat of increased frugality from
consumers. Finally, it is important to note that while LVMH is a global brand, it should be
sensitive to differing target customers based on diverse geographical cultures.
Quantitative Financial Analysis
Three-Year Company Financial Trend Analysis
The trends in LVMH’s financial statements indicate the company has seen growth in the past
three years. With these promising numbers, investors can anticipate the upward trends will
continue. As depicted in the financial statement information from years 2009, 2010, and 2011,
LVMH’s total current assets, revenues, and net income are increasing, as is shareholder equity.
The company continues to make substantial investments contributing to its constant growth.
Both income and earnings per share have almost tripled in the three years assessed, from €1.75
billion to €3.06 billion and from €3.71 to €6.27, respectively. From 2010 to 2011, the
company’s net income increased by 75% to €3 billion ($4.1 billion) and brand value increased
by 23 percent to €18.4 billion ($24.3 billion). This consistent growth makes LVMH a standout
competitor in its industry.
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Competition and Industry Comparison (Ratios)*
Evaluation of LVMH against other industry players is another way to measure the company’s
financial position in the industry. This is especially true because of the differentiation and
dynamism of the industry; it is difficult to gather very substantial sector information. When
assessed in comparison to other luxury brand companies, LVMH is the standout competitor. As
previously stated, its $24.3 billion value is almost as much as the combined values of Hermes,
Gucci, and Chanel. It is this extremely high brand value that sets LVMH apart from the
competition. Gucci Group, another luxury goods conglomerate, has a comparable stock price:
$140 to LVMH’s 137.50, inventory returns are relatively the same, as are accounts payable and
liquidity (1.32 v. 1.4). When discussing return on equity and return on assets, LVMH’s are
considerably higher as is its profitability and its debt to equity is considerably lower. These are
the factors that illustrate why LVMH’s brand value is so high.
*All numerical comparisons follow the GUGC to LVMH pattern.
Profitability
Long-term profitability is inevitable for the LVMH group. While many conglomerates that used
to see high profit margins have since seen a decrease in profitability, LVMH continues to
perform at high levels (Cook). Because LVMH owns or has stake in so many top brand
companies, in 2011 it had a stake in five of the industry’s 10 most valuable brands (Roberts).
This shows how wide the company’s market share extends. By maintaining an extremely high
brand value, the company’s ability to price products at a premium is also maintained. The market
for luxury goods has sustained despite economic downturns and has not seen oversaturation. For
example, the emerging markets in the BRIC companies (Britain, Russia, India, and China) open
the company to a new customer base looking to establish and showcase their wealth and status,
as demand increases so does LVMH’s profits. These are just some of the factors that display
channels in which LVMH will be able to sustain the long-term profitability reflected in their
financials. For 2012, based on half-year reports and forecasts by analysts, LVMH is expected to
continue to exceed expectations.
Recommendations
Based on the criteria for recommendation to invest in LVMH Moët Hennessy Ÿ Louis Vuitton
S.A., long-term investment in the company would be a well-informed decision with great
benefits. LVMH Moët Hennessy Ÿ Louis Vuitton S.A. has experienced sustained growth during a
global recession and is a standout world luxury brand company. The company’s diversified
portfolio, promising financials and forecasts, impeccable leadership, and focus on innovation
makes it a very attractive investment. A global player for several years, the LVMH group does
not seem to be slowing down on growth, value, or quality. It continues to earn respect worldwide
as a luxury brand with continued customer loyalty and continuous flow of new customers despite
its premium pricing for products. Based on the criteria for investment used in the qualitative and
quantitative analysis sections: stability, company innovation in the industry and marketplace, and
unique factors,
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Company analysis showed several reasons why investment in LVMH is an opportunity that
investors should consider. Porter’s Five provided a comprehensive look into the industry and
helped to reveal LVMH’s core competencies and competitive advantages. The analysis showed
that LVMH has many strengths and opportunities that it continues to capitalize on and has been
able to limit threats and respond to weaknesses because of the company’s innovation and strong
leadership. LVMH’s corporate and business level strategy of concentric diversification and
focused differentiation has effectively put the company in a unique position that puts it into a
separate subcategory when compared to competitors. With relatively high barriers to entry and
moderate barriers to exit, LVMH is in the position to have high, stable profits. Further analysis
showed that LVMH’s mission and vision was in line with their strategy, that there was fit among
the separate business lines for marketing and target demographics and that most of the products
had strong brands. Company performance was in line with these strong strategies as discussed in
the financial analysis section. The company displayed growth and profit, further analysis in 2012
financials showed that these trends are continuing. LVMH’s competitive advantage in high
quality, design, and differentiation allowed them to price their products at a premium. This was
also because of the company’s strong brand positioning in the marketplace.
Analysis on LVMH’s company financials supports this recommendation for investment. Stock
dividend price almost doubled in two years, LVMH continues to expand and make investments,
i.e. Bulgari. They have a very unique position by having so many brands fall under the parent.
The company is able to reach a wide range of the market because of this. Through the company’s
retailing like Sephora, they reach a more frequent buyer to purchasing of purchases or rare
liqueurs that take more market research for the consumer. In all of its different businesses
however, LVMH does a great job in securing consumer mindshare and brand loyalty. Assets and
equity continue to rise, stock has continued to do well in the last few weeks, and the company is
fairly valued.
Under the leadership of Bernard Arnault, LVMH has performed remarkably well. Being in the
luxury sector could have proven difficult for the company during the economic downturn but
instead; the company not only displayed sustainability but also showed steadied growth.
Arnault’s strategy to purchase new brands to further diversity the portfolio has proven to be
successful and rewarding. All segments of LVMH continue to show profit, (figure 4) which is
also very important to consider, especially when dealing with conglomerates.
LVMH’s focus on innovation in technology, environment, and management has also afforded the
company much success. The brand has been able to maintain high quality while also exploring
new, more efficient and effective means of manufacturing and doing business. This constant
force for innovation pushes leaders to find ways to identify how they can be better and in turn,
brings a very unique factor to the marketplace. Furthermore, the company’s strong culture and
high brand value are elements that have aided in the brand’s success. Development of a core
corporate brand as well as each individual brand is an important component that explains how
the brand, although a conglomerate, is able to find synergy in its products and operations.
10 Keshia Mae Jeantel
As LVMH Moët Hennessy Ÿ Louis Vuitton S.A. continues to build on its strong history, add to
its portfolio, and show continued growth, now is a strategic time to invest as stock and value
continue to rise. The company’s maturity and proven stability make it attractive and investors
can rest assured that there would be a low level of volatility in their investment. Investors can
also be comfortable with the fact that this is not exactly a “widows and orphans” stock, LVMH
has had continuous expansions by acquiring other well know luxury goods companies and
continues to make substantial investments. This has helped to further differentiate sources of
revenue and gain more consumers. The company’s innovation in the sector and well-established
culture make it standout investment.
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Appendices
Figure 1 12 Keshia Mae Jeantel
Figure 2 Figure 3 *Red Louis Vuitton, black Luxury Goods 13 Keshia Mae Jeantel
Figure 4 14 Keshia Mae Jeantel
BALANCE SHEET 2011
2010
COMMENTS 2009
TOTAL CURRENT ASSETS
LVMH’s total current assets are
13,267,000,000 11,199,000,000 10,975,000,000 increasing steadily.
TOTAL ASSETS
Total assets have increase
47,069,000,000 37,164,000,000 32,106,000,000 significantly from 2010 to 2011.
TOTAL CURRENT LIABILITIES
9,594,000,000
7,060,000,000
6,048,000,000
NON-CURRENT LIABILITIES
Noncurrent liabilities had a more
13,963,000,000 11,900,000,000 11,273,000,000 significant increase
TOTAL LIABILITIES
LVMH owns more than half of
23,557,000,000 18,960,000,000 17,321,000,000 their current assets.
TOTAL EQUITY
23,512,000,000 18,204,000,000 14,785,000,000
TOTAL LIABILITIES AND
SHAREHOLDER EQUITY
Liabilities and shareholder equity
47,069,000,000 37,164,000,000 32,106,000,000 is increasing.
CASH FLOW
NET OPERATIONS CASH FLOW
3,907,000,000
4,049,000,000
2,934,000,000
NET INVESTMENTS CASH FLOW
(3,016,000,000) (2,691,000,000) (1,051,000,000)
NET FINANCING CASH FLOW
(912,000,000) (1,778,000,000) (207,000,000)
TOTAL CASH FLOW
1,089,000,000
INCOME STATEMENT
TOTAL SALES/ REVENUES
GROSS INCOME
2,094,000,000
Cash flow has actually decreased
1,428,000,000 in the past year, investments have
increased which may explain this.
Total sales have increased, this is
23,659,000,000 20,320,000,000 17,053,000,000 good especially coming off of the
financial crisis.
The company’s income is
15,567,000,000 13,108,000,000 10,889,000,000 increasing steadily.
SG&A EXPENSE
10,304,000,000 8,815,000,000
NET INCOME
3,065,000,000
3,032,000,000
6.27
6.36
The company is spending more
7,537,000,000 on expenses, proportionate to
income it seems. Spending almost
50% of sales.
Income has almost doubled since
1,755,000,000 2009.
EPS
15 3.71
Earnings per share are
increasing, good for attracting
future investors.
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EBITDA
6,147,000,000
5,073,000,000
4,172,000,000
ASSESSMENT
Financial Component Guideline CURRENT PRICE
Company Competition GUCG Sector Comments 137.50
140.00
LVMH has a lower
stock price than the
competitor. Investors
are willing to pay
more per share for
GUCG. However,
LVMH does not trail
far behind
MOVING AVERAGE
200 DAYS
123.81
128.00
In the last several
weeks stock has
been performing well
in the
industry/sector.
QUICK RATIO
>1:1
0.5
.50
LVMH does not have
enough current cash
that can cover
current liabilities,
short term liquidity is
an issue
CURRENT RATIO
>2:1
1.4
2.63
The industry has
okay liquidity with a
ratio slightly greater
than 1.
INVENTORY TURNS
Higher is usually
better compared
with Industry
1.2
1.21
Probably because
this is a luxury good
company, inventory
turnover is very low.
There is a lot in
stock, purchases do
not occur that
quickly however, the
high price makes
this okay and it
seems in line with
the industry.
16 Keshia Mae Jeantel
Financial Component Guideline Company Competition GUCG ACCOUNT PAYABLE
Lower is usually
better
9.01
9.19
ROE
13-15%
considered
healthy
16.97
4.14
ROA
>5%
7.57
1.31
PROFITABILITY
At least 5%,
supermarkets are
usually 1-2%
13.05
6.73
GROSS MARGIN
Higher is better,
vary widely by
industry
65.14%
67.07
This shows LVMH
charges a premium
for its products,
which is important in
the luxury goods
industry.
OPERATING MARGIN
Same
22.25
20.02
LVMH has a higher
operating margin, it
takes into factor
components of
operating income
that make it a better
indicator for
company
performance.
DEBT/EQUITY
<2:1
34.1
51.9
EPS
50 better than 20
6.27
1.32
17 Sector Comments Compared to the
competitor, LVMH’s
accounts payable is
lower, showing
LVMH may have
more favorable
payment terms with
its suppliers.
11.7
LVMH’s ROE is over
15% and considered
healthy. It is slightly
lower than the sector
but a nice size
higher than the
competitor.
Return on assets is
not strong for LVMH
while it is for the
competition. Turning
assets into profit is
not something that is
easy for LVMH.
5.89
Interesting, while
LVMH’s ROA is not
good, the profitability
is very high relative
to the industry.
138.06
EPS shows LVMH is
profitable.
Keshia Mae Jeantel
Financial Component Guideline Company Competition GUCG Sector Comments PE RATIO
< 35; 20:1
19.11
18.25
20.31]
LVMH is less than
20:1 which is good.
PEG RATIO
<1:2
1.5647
n/a
Greater than 1.2,
which shows the
company, is more
than fairly valued.
P/S
<3:1
2.46
4.23
This is less than 3:1,
shows price to sales
is also on target as
per PE.
BETA
.7:1.0
1.06
1.2
With a beta greater
than 1, LVMH is
more volatile than
the stock market.
Luxury goods is
relatively risky.
INSTITUTIONAL
SHAREHOLDERS (LOOK FOR
RECENT OR SIGNIFICANT
CHANGES)
40-80%
n/a
n/a
18 Keshia Mae Jeantel
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