Blog: You, us, everyone

The last two-year performance of LVMH demonstrates why decisive action, so staying invested during difficult times, may be better than waiting it out and playing it safe. This luxury-brands giant remained active during the pandemic with new ventures instead of taking it slow and shareholders have fully benefited from the latter action. The pandemic would initially seem like a period of stagnation for luxury goods, since there isn't much opportunity to wear them. However, the luxury industry as a whole has been hitting sales goals while brands continue to raise prices. The already high price point of luxury may have insulated it from everyday consumables like groceries and gas, which have suffered the slings and arrows of inflation. Last year, LVMH was apparently approached by key a competitor, i.e., Richemont, about a potential merger proposal. Kering is strong in fashion and leather ("soft luxury"), while Richemont is strong in watches and jewelry ("hard luxury"). While combining these two business lines would make sense from a strategic point of view, it doesn’t from a cultural point of view - business needs and management styles are truly different. Supply chain concerns: Given the present geopolitical conditions, LVMH could face in the future some supply chain issues. As a discretionary giant with complex sourcing, production, and shipping systems, the company needs a healthy flow of raw materials and finished products. As of now, there aren’t any apparent issues, but a prolonged period of higher input prices could bring the healthy process to the brink. Inflation concerns: While inflation is hitting all products and services about in the same way, buyers of discretionary don’t see price increases as an issue as these purchases are most often one-time purchases.