LVMHF - LVMH: Navigating French Political Turmoil And Industry Slowdown
2024-07-18 13:28:51 ET
Summary
- LVMH is a prime example of a high-quality business with heritage brands, family ownership, and a loyal customer base.
- An industry slowdown and French political turmoil exert valuation pressure on LVMH and other French luxury firms alike.
- LVMH delivered 35 years of continuous organic growth at 9.1% annually, with many more to come, in my view.
- The stock price carries a valuation premium, at a Blended P/E of 22.5x, with EPS growth expected around 8% to 12% in the near term.
Speaking of what determines a quality business is a tricky one.
Each high-quality business possesses different attributes and it's generally not a one-size-fits-all. Instead, some businesses have large installed user bases, long streaks of EPS growth, monopoly-like positions, high-value brands, and many other qualities.
LVMH Moët Hennessy - Louis Vuitton, Société Européenne ( LVMHF ) , is a perfect example of a superb quality business:
- Owning heritage brands with a history stretching back to the 19th century.
- The business is 48% owned by the Arnault family with significant "Skin in the game".
- Their brands are often industry leaders in their respective categories with growing market share and value perception.
- Fully controlled supply chain, boosting margins and avoiding discount racks.
- Loyal customer base with higher net worth, willing to spend even during economic slowdowns.