New Megatrends – LVMUY the Luxury Products Conglomerate
If you belive in megatrends and want to invest money for many years in a good stock please countinue reading.
Here In Europe we have luxury cars like Porsche and Ferrari, watches like the Swiss Rolex, the French Louis Vuitton bags, Italian Prada clothes and Champagne. Several of the products have profit margins in class with the best technology companies. Luxury products benefits from a big demand all over the world but especially from a fast-growing Asian upper middle class who are getting richer and having a taste on European luxury.
One of the best ways to get a good exposure to some of the best luxury products is through LVMH. The company, which is considered the world’s largest luxury goods conglomerate, has had a brilliant ride on the Paris Stock Exchange for many years. The stock price is constantly high and the main owner and also the company’s chairman Bernard Arnault, who is one of the world’s richest businessmen, has built up an interesting creation with clear growth path. A LVMH share can appeal to the long-term investor who believes in continued demand for luxury products for many years to come.
LVMH comprises around 70 different brands that are divided into five different product areas. LVMH operates more than 4,500 stores around the world and is headquartered in Paris. Among some of the high-profile brands are Louis Vuitton, Bulgari, Fendi, Givenchy, Tag Heuer, Hennessy, Moet & Chandon, Glenmorangie and Sephora.
The company submits full reports half-yearly and in between, they leave sales figures by country and product area. LVMH’s latest financial statements for 2018 were strong with a new turnover record of EUR 46.8 billion and a net profit of EUR 6 990 million. The gross margin improved by 1.3 percentage points, resulting in a record high gross margin of just under 67 %. Sales growth was as high as 10 % and net profit increased by as much as 20 %. Most analyst firm have set the stock to outperfom. Surly there will be set higher stock prices in a near future.
China and the market
Another clear signal was that China and Asia continued to grow strongly. Sales in Asia have begun the year the strongest with a 17 %. Last year, Asia (excluding Japan) accounted for 29 % of global sales. During the autumn, investors were concerned that demand in the Chinese market would decline. But now growth looks to continue strongly.
The management says in the report that the start of the year has been good and all sectors are growing organic. The LVHM are saying in the year reports that they continues to focus on innovation, quality improvements, selective expansion and cost focus, just what previously so successfully focused on. However, one increment is raised because growth can be affected by continued or increased geopolitical uncertainty.
There are several factors that indicate a continued rising demand for LVHM’s luxury products.
The growth of rich people in the world in general and in Asia in particular is high. The growth of rich people has been over 6 % for many years, which is considerably higher than global GDP growth. A growth figure that corresponded to the annual growth of luxury products during the corresponding period. A growth that is likely to continue as President Bernard Arnault commented that the Chinese market is a so-called “target market”. A target market means that one percent of the country’s residents are potential customers of the company’s products. In China, the potential market today is 13 million, which is a significant potential since LVMH knows that they only have 1.4 million customers in China.
A new creative director Virgil Abloh in Fashion & Leather Goods has also been around for a year, with a clear focus on modernizing brands, so that they appeal to the new, strong Millennial Group. It is customers born in the early 1980s to the early 2000s who are increasingly buying more of the luxury products.
What do you think? Do you belive in this mega trends of Luxury products? Feel free to comment.
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