LVMH: First European Company To Surpass $500 Billion Market Value Milestone

LVMH has become the first european company to surpass $500 billion market value milestone, on account of booming sales of luxury goods in China and a strengthening euro as per Bloomberg.

The stock price of the Paris-based LVMH outlet (erstwhile name LVMH Moet Hennessy Louis Vuitton SE) surged by 0.3% to Rs 903.70 per share on Monday morning, rising the company's valuation to Rs 454 billion ($500 billion).

LVMH's performance was driven by Chinese shoppers splurging on pricey goods after emerging from pandemic lockdowns. The company registered growth in all regions even with a "bit of a slowdown" in the US.

Arch rival Hermes International subsequently published its own strong numbers, reinforcing the view that China's reopening from pandemic lockdowns is fuelling growth across the luxury goods industry.

"Luxury stocks embody what the equity market has best to offer at the moment: exposure to Chinese consumption, which continues to surprise on the rise, and robust margins thanks to their pricing power," said Lilia Peytavin, European portfolio strategist at Goldman Sachs in Paris. "This differentiates Luxury from Tech, whose margins have been contracting for several quarters already."

Demand has held up for LVMH products, Louis Vuitton handbags, Moet & Chandon Champagne and Christian Dior gowns among them even as surging inflation and rising interest rates have threatened to tip the world into recession.

Earlier this month the company did caution that it's seeing a slowdown in US growth, with demand for cognac and leather goods particularly were affected. While some investors fret that the stock inevitably will be hurt should the economic slowdown worsen.

However, paradoxically, concern about a recession is lifting LVMH's value in dollar terms. The euro this month jumped to its highest level in more than a year as the dollar slumped, fuelled by increasing market expectations that a worsening US economy will prompt the Federal Reserve to cut interest rates this year. Bloomberg

This feat was achieved almost after two weeks of the company joins the world's top 10 ranks. Also, the climb in share price has further increased wealth of Bernard Arnault as the world's richest person, who built LVMH into a global powerhouse through a series of acquisitions. Bernard's fortune stands at almost $212 billion, according to the Bloomberg Billionaires Index.