LVMH will be reporting results for H1 2018 on July 24, 2018. The group continues to impress the market with good levels of revenue coming from substantial growth in the US, Europe, and Asia.

We believe LVMH is a diversified company with a strong position in the market, where the investor can benefit from future growth. Prospects are strong and positive; growth can be foreseen throughout the coming years. The company’s presence in different markets and regions ensures the company’s success; its policies on corporate and social responsibilities ensure success in all aspects. With its global reach increasing, LVMH will be a favourable investment for an extended period of time.

Having said this, we acknowledge the fact that the shares are not cheap, trading on high P/E multiples of 28x. However, given the favourable economic environment, this should continue to be a tailwind for the shares. We maintain our €305.00 price target, but reduce our stance from a Buy to a Hold.

The group has been successful at:
• Maintaining its market share in the distinct segments it operates in;
• Encouraging growth while sustaining the level of quality;
• Keeping up with developments and innovation, particularly in technology;
• Achieving excellence and creativity in all aspects; and
• Diversifying in different segments and doing well across the board.

Expectations for H1 2018
• The first quarter of 2018 was highlighted by a positive start to the year, despite currency headwinds. We expect to see an improvement in the second quarter from a better exchange rate.
• Resilient business performance despite adverse geopolitical environment.
• Particular focus on innovation, quality, network expansion, and cost management.
• Management is opting for a cautious stance. However, we remain optimistic in line with the market as current economic environment is favourable for this business.
• All segments are expected to continue to contribute towards organic growth.

Outlook
• Following a first quarter dominated by a strong euro, we have seen movements in the euro in the second quarter, whereby headwinds become tailwinds. The company is expected to regain its strength during the remaining period of 2018.
• China and US markets are expected to outperform.
• We expect the company’s EBIT levels to reach the 20% mark during this financial year, as compared to the company’s forecast of 19%. Our opinion is also viewed by the market; we expect the company to continue to perform well in this favourable economic environment.
• Launches and events held at new locations and markets will help maintain a solid growth.
• All brands aim to raise their profile and visibility, particularly online; some have taken a strategic approach by opening at high-profile locations and renovating existing stores.
• Management are taking a cautious stance during the remainder of the year, while we remain optimistic regarding its prospects.

About the company
LMVH is made up of 70 houses operating in all five major sectors, i.e. wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewellery, and selective retailing. Each brand is well-established and helps build a legacy while maintaining focus on the quality of its products. The group is committed to its principles and integrity, and its environmental and social responsibility define the behaviour required by executives, employees, and all its partners.

Disclaimer:

This article was issued by Kristian Camenzuli, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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