The King of Luxury Brands
Domenico de Sole is the chairman of Tom Ford’s design house, and regarding luxury, he observed, “Luxury is the balance of design, in the sense of beauty and highest quality.”
Coco Chanel, the great founder of her own fashion and fragrance house noted, “Some people think luxury is the opposite of poverty. It is not. It is the opposite of vulgarity.”
However you view it, luxury is something personal to all of us. I find luxury in Porsches, so I collect them. Yes, I’m a trained engineer, so my concept of luxury may differ from yours, but regardless of our individual views of luxury, there’s a very good chance LVMH Moet Hennessy Louis Vuitton (OTC: LVMUY) has it covered.
It has 75 “houses” in six different categories – Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, Selective Retailing, Other Activities – and those houses cover a stunning array of the best products the world has to offer.
From one of the most legendary vineyards in the world, Chateau d’Yquem (seen above), that has handpicked its legendary Sauternes grapes since 1453 to the fashion house of Louis Vuitton, LVMH captures the brands that define timeless luxury.
As I said in my introduction, luxury has become a very big business. In 2008, LVMH took this big business seriously when it purchased the legendary yacht building and the company Royal Van Lent. Its history goes back more than a century and has built yachts for the likes of Henry Ford and Malcom Forbes.
Just remember, when you’re building things for the kind of people that buy luxury goods, price isn’t the point, as Domenico del Sole said. It’s about the quality, and that’s why so many of these luxury goods are knocked off around the world. Even to have a cheap knock-off is an attempt to capture that feeling of luxury. Still, it’s the real thing that draws the big money, and while most people may have a piece of Tiffany & Co. jewelry stowed in the company’s classic blue boxes, or a Tag Heuer watch, there are a growing number of people that are wearing them along with their Loro Piana, Christian Dior, and Fendi outfits every day.
One LMVH Brand for the Masses
One of its most interesting acquisitions has been the beauty stores called Sephora. LVMH purchased the company in 1997, and it has used it as a way to attract a younger demographic that is focused on entry and mid-level beauty brands. The price points are accessible to everyone.
It’s an entry level for younger people into the larger world of LVMH brands, and it’s also a huge growth sector. Whether it’s coincidence or a causation, the rise of beauty products is in direct correlation to the expansion of social media. There are tons of tweens, teens, and older girls that have their own take on makeup and beauty styles, and this has helped LVMH access a different demographic to diversify its business.
Plenty of Upside from Here
Although the LVMH stock is an over-the-counter ADR, it still has a $373 billion market cap, so it’s widely traded in the US. It also lists off European exchanges as well, since it’s headquartered in Paris, France. The stock is up almost 6% in the past 12 months. Recent losses have cut its ascent, but that just makes it a better buy at this point.
It has been hit by the market uncertainty and rising inflation, but LVMH isn’t like most retail brands. It’s a relative outperformer in its sector now and will come back strong once the current mess is behind us.
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