In western Washington, I grew up on a 24-acre vegetable farm. It took a lot of effort on my part and my family’s part. But, because farming is a low-paying job, that hard work never converted into material wealth. Our family rarely had the money for niceties, especially LVMH goods, no matter how hard my father worked.
Yet one thing my father scrimped and saved for was airfare so my mother could see her relatives in Japan every few years when we migrated to America in 1957. In the 1960s and 1970s, airline tickets were quite expensive, but what cost almost as much, if not more, was the “omiyage” my mother would bring for all her friends and relatives back in Japan. Omiyage translates to “souvenir” in English, and gift-giving is important in Japanese society, as it is in most Asian civilizations.
When my mother traveled to Japan, she usually took a second suitcase full of omiyage ranging from Levi’s jeans and Converse sneakers to G.I. Joe and Barbie dolls, Wrigley gum, Coca-Cola (KO) T-shirts, Marlboro cigarettes, and Marvel comic books. They were the major “labels” at the time, and label consciousness is even stronger today.
The main difference is that Gucci, Prada (PRDSF), Hermès (HESAY), and Bulgari have taken the place of Levi’s and Converse. This brings me to LVMH, the world’s largest luxury goods corporation.
Revenues Soaring
LVMH had $86 billion in revenue and $22.9 billion in profit in 2022. These figures were 23% higher than the previous year. That’s a LOT of money, but given the company’s size, it’s not surprising (which goes well beyond just Louis Vuitton handbags).
LVMH also owns 60 more premium brands, which are marketed in exclusive boutiques in wealthy cities. This includes fashion labels such as Givenchy, Fendi, Celine, and Berluti…wines and spirits such as Mot & Chandon, Dom Pérignon, and Hennessy…perfumes and cosmetics such as Christian Dior, Guerlain of Paris, and Kenzo…as well as watches and jewelry such as TAG Heuer, De Beers, Zenith, and Chaumet.
I’d never spend $500 on a bottle of Dom Pérignon or $2,000 on a purse. But, all of my status-conscious friends and successful Asian women are devoted LVMH clients. Therefore, it should come as no surprise that luxury goods profit margins are out of this world. The leather and fashion segment has a profit margin of more than 30%.
LVMH is a member of the CAC 40, the French equivalent of the Dow Jones Industrial Average, and is traded on the Paris Stock Exchange. Nonetheless, it is more convenient for US investors to purchase it on the over-the-counter market, where each US depositary receipt equals 0.2 shares of the Paris shares.
But given that demand for these goods got reignited, I think you know what to do with LVMH stock.
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