The world leader in luxury is the first European company to cross this symbolic threshold. Buoyed by the reopening of the Chinese economy, LVMH has jumped by almost 18% since the beginning of the year, an increase almost twice as fast as that of the CAC 40 as a whole.
Luxury shines at the Paris Stock Exchange. The world leader in the sector, the French LVMH, crossed the threshold of 400 billion euros in market capitalization on Tuesday for the first time after climbing 0.6% to a record level of 797 euros. Never before has a European society reached such heights.
Investors have been flocking to the main luxury stocks since the beginning of the year, while the reopening of China offers important growth prospects for the sector. As a result, the LVMH stock (owner of the “Echos”) has jumped by about 18% since January 1, an increase almost twice as fast as that of the entire CAC 40 (+9.4%). It represents 17% of the total capitalization of the flagship index of the Paris Stock Exchange.
Very high margins
The luxury giants, from LVMH to Hermès via Richemont, have weathered the recent crises very well. Their pricing power is unparalleled, regardless of whether the global environment is inflationary or not, which allows them to display particularly high margins. Bank of America analysts expect the industry’s average margin to climb to 27.2% this year, even as most companies are expected to see their margins crumble.
LVMH also benefits from a greater diversification than its competitor’s thanks to its very extensive brand portfolio, which ranges from spirits (Hennesy, Moët & Chandon, or Château d’Yquem) to haute couture (Dior, Louis Vuitton) via watches and jewelry (Tiffany & Co, Chaumet, Bulgari) and distribution (Le Bon Marché, Sephora).
LVMH is ahead of Tesla
The sector leader posted an operating margin of 27.9% in the first half of 2022 with a current result of more than 10 billion euros over the period. LVMH is thus among Bank of America’s preferred stocks in Europe, with a potential increase of 25% this year and a price target of 1,000 euros per share.
The largest capitalization of the Paris Stock Exchange and the European markets as a whole, the French group now stands out in twelfth place in the world with a valuation of 430 billion dollars. It is worth more than Tesla (400 billion) or Meta (350 billion) but still remains far from the American giants of the Net such as Apple (2.150 billion), Microsoft (1.750 billion), or Google’s parent company, Alphabet (1.180 billion).