LVMH: King of the Luxury Jungle

-from Bernstein Research
September 2009

Profit from temporary W&S woes to bag the stock at discount prices

LVMH is the strongest player in the luxury goods industry, a giant in an industry where fixed costs make scale paramount; the only “two-legged” balanced player, leading with mega-brands in both Leather Goods and Wines & Spirits; enjoying stable group EBIT margins as a consequence.

Champagne consumer demand weakness, de-stocking and oversupply in 2010 are well understood; W&S concerns have depressed the stock close to 20-year though multiples and in the same ranges of smaller and more volatile hard luxury players and other peers; an opportunity in our view.