What is LVMH’s Competitive Advantage (Moat)? | Value Investors Central (2024)

FAQs

What is the competitive advantage of LVMH? ›

Overall, Louis Vuitton's competitive advantages lie in its ability to evolve with the times, maintain its luxury positioning, and engage in innovative strategies that enhance its brand value and attract a wider audience.

Potential for long-term value creation: By focusing on companies with enduring competitive advantages, moat investing aims to capture the long-term value creation potential of these businesses. This aligns with the fund's commitment to a low turnover portfolio and a measured approach to stock selection.

They indicate that LVMH is following a diversification strategy with its entire portfolio. The company is aiming to maintain its brand image and the premium quality of all its products. As a result, it could use innovation and generate new technologies to achieve its objectives and projects.

Creativity and innovation are part of LVMH's DNA. They have always been key to our Maisons' success over the years and invite exploration of the infinite possibilities offered by new technologies, a major growth path for the Group.

LVMH competitors include CHANEL, Calvin Klein, Richemont, BCBG and Burberry. LVMH ranks 1st in CEO Score on Comparably vs its competitors. See below how LVMH compares to its competitors with CEO Rankings, Product & Services, NPS, Pricing, Customer Services, Overall Culture Score, eNPS, Gender and Diversity Scores.

The LVMH Prize is open to designers from all over the world, aged 18 to 40, who have created at least two womenswear, menswear or genderless collections.

The term "economic moat," popularized by Warren Buffett, refers to a business's ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share.

During this past 52-week period, the fund has traded between $68.26 and $87.09. MOAT has a beta of 1.04 and standard deviation of 19.09% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

What is a wide moat? A company with a wide moat is considered to have a sustainable competitive advantage that will remain for at least twenty years¹. This makes wide moat companies very attractive for investors as the company's profits and market share are highly likely to be protected over the long term.

LVMH has demonstrated a strong financial performance, with top-line revenues growing by 14% year-over-year (YoY), bolstered significantly by its leather goods and fashion segment. This growth trajectory underscores the company's resilience and its ability to outperform even during economic downturns.

Why is LVMH so profitable? ›

Their traditional know-how, creativity and sense of innovation have enabled LVMH to showcase French excellence to the world. The brand has thus become the absolute symbol of French luxury and craftsmanship.

The luxury industry is expected to grow, and LVMH's high margins, growing returns on capital, and solid financial stability make it an attractive investment.

2.1 Strengths

Broad product portfolio 3. Strict quality control 4. Multi-brand strategy 5. Celebrity endorsem*nt and star marketing As a leading French conglomerate in the luxury goods sector, LVMH enjoys a high level of brand recognition.

"The values of the LVMH Group are excellence, creativity, innovation and an entrepreneurial spirit"

LVMH completed the purchase of Tiffany in January 2021. In 2021, with a valuation of $329 billion, LVMH became the most valuable company in Europe. In January 2022, LVMH acquired a minority stake in the New York–based label Aimé Leon Dore for an undisclosed sum.

Luxury brands leverage their high prices to create a prestigious image. This appeals to customers, who are more inclined to pay a premium for the bragging rights that come with scarcity. This strategy comes with risks, as affluent consumers can be price sensitive too.

Created in 1987, the LVMH Group today comprises more than 75 exceptional Maisons, each of which creates high-quality products. It is the only group present in all five major sectors of the luxury market: Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry and Selective Retailing.

You can use your brand equity as a competitive advantage to attract new customers, retain existing ones, and increase your market share and profitability. You can also use your brand equity as a strategic asset to enhance your business value and sustainability.