LVMH: A Good Investment for the Future

LVMH, a leader in the luxury goods sector, is grappling with concerns over declining demand from Chinese consumers, which could signal a slowdown in the industry that has enjoyed unprecedented growth in recent years. Bernard Arnault, who has been at the helm since 1987, along with his family, holds a significant stake in the company, owning 48.6% of the business and 64% of the voting rights. The fashion and leather goods division remains the powerhouse of LVMH, generating €42 billion in sales in 2023, nearly half of the company's total revenue. The geographical breakdown of LVMH's sales reveals a heavy reliance on Asia, which accounted for nearly a third of its revenue, while the United States and Europe contributed 25% and 17%, respectively. Notably, the share of sales from Asia has increased significantly over the past two decades, rising from 17% in 2000 to 25% in 2010. However, the current economic climate has led Chinese consumers to be more cautious with their spending, resulting in a modest 2% growth in organic sales during the first half of the year. To regain momentum, LVMH would need to see a 20% increase in sales to Chinese consumers over the next few years to match pre-pandemic growth rates. Despite the challenges, the company's strong brand recognition and design expertise position it favorably in the market. For investors, LVMH shares, currently trading at a four-year high, may present a worthwhile long-term investment, with alternative options available through funds like the £2 billion Fidelity European Trust, which includes LVMH among its top holdings.