LVMH, the world’s largest luxury goods conglomerate, became Europe’s first company to surpass $500 billion in market value due to booming sales of luxury goods in China and a strengthening euro. This achievement comes less than two weeks after LVMH joined the ranks of the world’s 10 biggest companies, powered by a surge in first-quarter sales. Rival Hermes International subsequently published its own strong numbers, reinforcing the view that China’s reopening from pandemic lockdowns is fueling growth across the industry.
The company’s rising value has swelled the wealth of the world’s richest person, Bernard Arnault, who built LVMH into a global powerhouse through a series of acquisitions. His fortune stands at almost $212 billion, according to the Bloomberg Billionaires Index. Over the next three decades — and through dozens of acquisitions — he built LVMH into a luxury behemoth selling everything from spirits to leather goods to jewelry through more than 5,600 stores worldwide.
The $500 billion milestone was decades in the making. Arnault, LVMH’s chairman and chief executive officer, made his foray into luxury in 1984, taking over Boussac Saint-Freres, the bankrupt textile group that owned a gem: Christian Dior. He spun off most of the company’s other businesses and used the windfall to buy a controlling stake in LVMH, whose two main companies, Louis Vuitton and Moet Hennessy, had merged in 1987.
For now, concern about a recession is lifting LVMH’s value in dollar terms. The euro this month jumped to its highest level in more than a year as the dollar slumped, fueled by increasing market expectations that a worsening US economy will prompt the Federal Reserve to cut interest rates this year.
Analysts have been raising their targets on LVMH’s stock amid the steep run higher. They see room for further gains, as 30 out of the 36 analysts tracked by Bloomberg have a buy-equivalent rating. Bank of America Corp.’s Ashley Wallace sees the stock hitting €1,000 in the next year. “LVMH is too cheap given the attractiveness of the luxury goods sector, its strong portfolio of brands and best-in-class execution,” Wallace wrote in a report April 13.
However, LVMH did caution this month that it’s seeing a slowdown in US growth, with demand for cognac and leather goods particularly affected, and some investors fret that the stock inevitably will be hurt should the economic slowdown worsen. The sprawling conglomerate, with its 75 labels ranging from Dom Perignon to Givenchy and Tiffany & Co., became a training ground for ambitious designers seeking to make a name for themselves.