LVMH has been a core position in our World Stars Global Equity strategy for more than five years. We have held it through the Covid shutdown, the sharp recovery that followed it and the current economic uncertainty. It has been our fifth best performing stock, generating a 26% annualized return. Our investment thesis on the luxury goods sector and on LVMH remains unchanged. As industry leader it has significant long-term growth prospects based on its brand power, global reach and scale.
Growth in luxury goods continues to be powered by structural demand, driven by the aspiration of consumers to own luxury brands, the rise of the middle class across the globe, and the strong equity and pricing power of the biggest brands.
Last month’s edition of the leading financial trade publication, Portfolio Adviser celebrated International Women’s Day. Katerina Kosmopoulou, deputy portfolio manager of the J. Stern & Co. World Stars Global Equity fund, was interviewed about our view on investments including the luxury sector and LVMH.
LVMH’s Luxury Empire Rides out Recession in Style
As a slow trek towards recession remains on the minds of investors, one area of business seems to have flourished. As wallets become lighter, luxury retailer LVMH has continued to embellish them with Louis Vuitton logos.
Katerina Kosmopoulou, deputy manager of the J. Stern & Co World Stars Global Equity fund, noted that the luxury goods market holds a few immunities to the difficulties other sectors face as belts tighten, in areas such as competitive pricing and new market players. LVMH, which holds legacy brands including Louis Vuitton, Givenchy, Marc Jacobs, Tiffany & Co and Tag Heuer, is a main player in this industry.
“It’s very rare to launch a successful new luxury brand because they rely on craftsmanship and heritage. There’s an inherent value that comes from having the history of 100 years that differentiates these brands from others,” Kosmopoulou said.
“It’s a completely different experience than going into a mass market store. You have people waiting on you, the products displayed in a specific way and sales service. On top of that, there is significant advertising that goes into maintaining those barriers to entry, which allows them to have the pricing power. There’s a reason why some brands will just never have the products on sale. It doesn’t happen because they are protecting the brand.”