LVMH Moët Hennessy is releasing a new whisky brand with Beyoncé.
You might think that owning a fancy watch or expensive clothing is the best way to add a little luxury to your life. I’d argue that purchases like that aren’t worth it, though. Fashion trends change quickly, and at the end of the day, all watches tell the same time.
Instead, you might want to consider investing in luxury brands as opposed to wearing them. One of the best examples I can think of in the luxury space is LVMH Moët Hennessy (LVMUY -0.10%). Shares have an all-time total return of over 1,300%, but are actually down about 18% over the last six months.
The best part? I think now looks like a great opportunity to take advantage of the depressed price action and scoop up shares.
Let’s dig into Louis Vuitton’s entire business, and explore how the company’s latest initiative featuring global icon Beyoncé could help bring a much needed turnaround.
A close look at Louis Vuitton’s business
LVMH is much more than a handbag company; it’s a conglomerate operating across perfume and cosmetics, watches and jewelry, apparel, and alcohol. The table below breaks down trends in revenue and operating profit among LVMH’s various business segments through the first six months of 2024.
| Category | Revenue Growth | Operating Profit Growth |
|---|---|---|
| Wines and spirits | (12%) | (26%) |
| Fashion and leather goods | (2%) | (6%) |
| Perfumes and cosmetics | 3% | 0% |
| Watches and jewelry | (5%) | (19%) |
| Retail | 3% | 7% |
| Other | No change | No change |
Data source: LVMH Moët Hennessy.
The table above illustrates that LVMH’s poorest performing business throughout 2024 is wines and spirits. Revenue and operating profit have declined 12% and 26%, respectively, through the fist six months of 2024 compared to the first half of 2023.
Management attributed these declines to overall pullbacks in consumer spending, a volatile retail environment, and a tough economic market in China.
However, in the company’s shareholder letter LVMH management wrote that it is focused on “pursuing growth opportunities and enhancing the desirability of their brands” to reignite growth in the spirits business.
And with that, Beyoncé will be taking center stage.
Why I think the partnership with Beyoncé is a home run
In late August, Beyoncé announced the formation of a joint venture with LVMH’s spirits subsidiary, Moët Hennessy. Per the collaboration, Beyoncé and LVMH crafted a new whisky brand, called SirDavis. I think this is a savvy move by LVMH, and I see the company benefiting beyond intangible qualities such as the star power that Beyoncé brings to the table.
In recent years, many celebrity-owned spirits companies have experienced outsize success. For example, back in 2017 actor George Clooney sold his tequila company, Casamigos, to Diageo for a reported $700 million plus another $300 million in potential earn-out payments. Moreover, former wrestler and current Hollywood actor Dwayne “The Rock” Johnson has seen notable success with his Teremana Tequila brand, which works closely with German liquor giant Mast Jägermeister.
In addition, Ryan Reynolds, a front man of the Marvel Cinematic Universe, sold Aviation Gin to Diageo back in 2020.
When it comes to whisky in particular, there have been a number of celebrities involved with the spirit. Legendary folk singer Bob Dylan, Oscar winning actor Matthew McConaughey, and soccer superstar David Beckham have each created or promoted whisky brands. However, it’s important to note that Beckham’s endorsement deal with Diageo ended last year while McConaughey’s relationship with Wild Turkey came to a close in 2022.
So while other types of alcohol have been endorsed by many celebrities and have witnessed successful outcomes, I think Beyoncé and LVMH have identified a unique pocket of the spirits realm that looks ripe for disruption.
Image source: Getty Images.
Should you invest invest in Louis Vuitton stock?
The chart below illustrates LVMH’s growth by geographic region. With the exception of Japan, the company’s growth has been nominal for much of 2024 — especially in the U.S. and Europe. As alluded to above, LVMH has also faced some pressure in China in particular.
Image source: LVMH.
Variables including elections in the U.S. and Europe, lingering inflation, and a mixed view of consumer purchasing power are all likely taking a toll on LVMH’s stock price action right now.
But with that said, I think the sell-off over the last six months is overblown. As a luxury retailer, LVMH need not worry too much about inflationary pressures. Moreover, as a conglomerate the company is extremely diversified, which provides an ability to generate growth from many different areas that influence consumer trends.
I am optimistic that the company is making decisions selectively and investing in the right areas. I see the partnership with Beyoncé as a positive sign that management understands where LVMH needs to rejuvenate growth and is making extremely specific decisions on how to do so. For all of these reasons I still see LVMH stock as a no-brainer buying opportunity and think gains are very much in store for long-term investors.
