LVMH financial analysis

Topics: LVMH, Finance, Luxury good Pages: 6 (790 words) Published: April 9, 2014
SWOT Analysis LVMH
LVMH Moet Hennessy Louis Vuitton SA, (LVMH), is a France-based luxury goods company. It owns a portfolio of luxury brands and its business activities are divided into five segments: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewellery, and Selective Retailing. The activities of the wines and spirits sector include the Champagne and Wines branch, and the Cognac and Spirits branch. The Fashion and Leather Goods group includes Louis Vuitton, Kenzo and Rossimoda among others. LVMH is present in the perfume and cosmetics sector through the French Houses Christian Dior and other brands. Watches and Jewellery sells such products as TAG Heuer, Zenith, Dior Watches, Chaumet and Fred, among others. Selective Retailing businesses operate in two segments: travel retail and the selective retail concepts represented by Sephora and Le Bon Marche. In September 2013, the Company acquired majority stake in Nicholas Kirkwood, a British shoe designer company.

This French group is the biggest luxury company in terms of turnover. We can relate the sales of LVMH to this graph that shows the weight of each geographic zone in sales. This graph shows how the appreciation of the euro can be a problem to LVMH. LVMH is present in every single sector of luxury, not like other competing big groups

This graph shows us the strength of the world’s luxury market that was worth 212 Billion euros in 2012.

4) Investment and financial management ratios : Financial structure ratios CAPITAL STRUCTURE
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Fin. Debt/Equity
33.14%
27.73%
32.36%
30.62%
41.93%
42.79%
47.83%
49.56%
66.51%
84.27%
Net Debt / Equity
0,19
0,16
0,21
0,16
0,23
0,30
0,27
0,32
0,47
0,68
Goodwill & Intangibles / Total Assets
17.89%
15.63%
14.78%
13.53%
13.30%
13.99%
15.67%
15.76%
15.97%
15.72%
Net Debt / Total assets
8.91%
8.04%
9.92%
7.41%
9.72%
12.40%
10.10%
11.90%
15.68%
24.75%
Total Debt / Total Assets
15.89%
13.64%
15.44%
14.17%
18.02%
17.47%
18.03%
18.26%
22.43%
30.75%
Total Equity / Total Assets
47.95%
49.20%
47.70%
46.28%
42.97%
40.84%
37.70%
36.84%
33.72%
36.48%
Net Debt / EBITDA
0,71
0,59
0,77
0,64
0,79
0,94
0,78
0,95
1,42
1,65
Payout Ratio
28.08%
26.72%
284.08%
33.98%
46.11%
38.69%
38.71%
36.50%
39.13%
46.08%
Retention ratio
71.92%
73.28%
N/M-
66.02%
53.89%
61.31%
61.29%
63.50%
60.87%
53.92%

To formulate an overall financial diagnosis we have analyzed the financial health of the company through looking into liquidity and solvency and this has helped us find the main risks and strengths of the company. We have observed that the results we have obtained are coherent with the initial SWOT analysis that was provided by Xerfi. The company is financially solid as it debt is low at 32,14%. It is financing properly its assets as the Total debt/Total assest is equal to 15,89% and net debt/total assets is equal to 8,91 in 2013. The company has low debt and a reasonably high auto-financing system even though it is not completely independent it has become more and more independent over the past years. This is one of its main strengths. What can this be due to : The company wants to be independent. We can see this through it’s strategic attitude also. The company is positioning itself on one of the most fierce markets in the world. For LVMH making sure that their products are the best money can buy is essential. They have gone through the process of mastering their supply chain over the past years. Meaning that they have strategically pent millions on buying suppliers and integrating them into the group. We can take the example of buying their main tanner for twice what they were worth just to master the supply of exotic leather. The financial decisions of the company also reflect this state of mind : Keep debt low. Sadly we do not have the necessary information...
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