Luxury group LVMH, known as the parent company of Louis Vuitton, Moët & Chandon and others, has had a record year: profits went up by as much as 21% and exceeded the record height of 10 billion euros. How? By embracing exclusivity.
The milestone of 10 billion euros profit
Who’s afraid of the growth of discount? Who’s scared of the Chinese-American trade war? Nothing to worry about, according to a very confident LVMH, the French luxury group that houses 70 brands – from Bulgari to Louis Vuitton. Last year, the holding’s turnover grew by over 11% to 46.8 billion euros. That’s almost double the market average.
The group’s profit results are especially remarkable: for the first time, LVMH easily passed the milestone of 10 billion euros gross profit. The operational margin ended at 21.4%, which is 1.9% more than the year before, while net profit came to 3.65 billion euros, 18% more.
A policy of raised prices
LVMH’s fashion and leather department – which represents a third of all profits – performed particularly well in 2018: its turnover increased by 21% to 4.9 billion euros. According to top executive Bernard Arnault, their subsidiary Louis Vuitton is in full growth, although the group is consciously choosing for “selective and controlled expansion”. The brand will receive four more workshops this year.
Choosing to be selective and exclusive seems to be the strategy that has made the French holding so successful. Arnault proudly remarks in his overview of the year that Louis Vuitton is the only fashion brand in the world that never organises sales or promotions. He also mentions a policy of raising prices as one of the factors contributing to the brand’s growth.
No trade wars or gilets jaunes can touch LVMH
The Chinese-American trade war hasn’t hit LVMH either. CFO Jean-Jacques Guiony doesn’t even believe there is a real trade war yet: “We don’t see any specific signs of slowdown in the Chinese market. While the rest of the market sees the glass as half empty, we see it as half full.”
Even the gilets jaunes and their protests couldn’t harm LVMH: although the group was forced to close its French shops for a number of Saturdays, its wealthy customers simply bought more on Sunday. In the last quarter of 2018, the group grew steadily in almost all markets: Asia grew by 15% (with the exception of Japan), Europe by 7% and only in the US did the turnover increase slow down in the end-of-year period to 5%.
LVMH is cautiously optimistic for 2019: the group recognises the uncertainty of the future and is already stocking up for the UK in case of a no-deal Brexit. Britain already has four extra months’ worth of champagne and cognac.
