LVMH sets new market capitalisation record on Paris Stock Exchange
On Monday, LVMH set a historic new market capitalisation record for the Paris Stock Exchange. The world’s number one luxury goods group exceeded a market capitalisation of €250 billion, after rallying consistently with serial rebounds since the start of the year, its share price surging by nearly 20% to reach €498.8.
No other company listed on the Paris Stock Exchange has ever soared so high, and this despite the pandemic’s negative effect on LVMH’s results. The group, whose portfolio includes 75 prestigious labels in fashion (among them Louis Vuitton, Dior, Givenchy, Fendi and Guerlain) as well as in the wine and spirits sector, recorded a revenue drop of 21% (based on published organic data) in the first nine months of the year, down to €30.348 billion.
LVMH, led by Bernard Arnault, has undoubtedly benefited from a bullish stock market, driven by reports of scientific advances in the development of a vaccine for Covid-19 and by the US presidential election results - but this is only part of the story. Reaching an agreement at the end of October with Tiffany & Co., after the engagement was broken off in September, for an acquisition regarded as the biggest in the luxury industry’s history, certainly played a part too.
Above all, LVMH’s size and resilience in dealing with the Covid-19 crisis have enabled the group to perform positively on the market, on par with other top French luxury names. The share price of Hermès has risen by 25% on an annual basis, and Kering’s by more than 11%. As was underlined on Tuesday morning at the Milan Fashion Global Summit 2020 (MFGS), organised by publisher Class Editori, “in France, share prices for the top luxury groups have been rising since the start of the year, while they are all declining in Italy, except for a few names like Moncler, Brunello Cucinelli and Prada.”
Maurizio Tamagnini, CEO of investment fund Fondo Strategico Italiano, observed that “critical mass is a crucial element for a company’s development and its ability to react to a crisis, as demonstrated by the gap that has opened up, in fact has doubled in six years, between the aggregate revenue of the three top French fashion/luxury groups and the top 15 Italian ones. Between 2014 and 2019, the aggregate revenue of France’s top three names rose by 80%, from €25 billion to €45 billion, while that of the top 15 listed Italian fashion groups grew by only 11% in the same period, from €16 billion to €18 billion.”
Tamagnini added that “the leading luxury groups’ sheer size has enabled them to continue to generate liquidity during the crisis, while the cash flow of smaller companies has completely dried up, and they have been subjected to twice the amount of pressure due to their dwindling sales.”
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