French luxury group LVMH on Monday became the first European company to hit a $500bn market capitalisation, boosted by Chinese consumers’ appetite for luxury goods following Beijing’s decision to lift all Covid-19 related restrictions.
Shares in the Paris-listed company, whose brands include Louis Vuitton and Dior, edged up 0.3 per cent to €903.7 to achieve a market capitalisation of €454bn, equivalent to $500.3bn as the exchange rate hit 1.1019 to the dollar.
The milestone meant that the controlling stake held by Bernard Arnault and his family hit $211.8bn, up by $1.1bn on Monday alone. The French billionaire is the world’s wealthiest man, well ahead of Tesla founder Elon Musk, whose wealth is valued at $165bn, according to Bloomberg’s billionaire index.
LVMH has benefited from the improving economic outlook in China, the world’s second-largest economy and the luxury sector’s biggest growth market, as well as the strengthening euro.
The company posted a 17 per cent increase in revenue in its first-quarter results thanks to a rebounding Chinese luxury market. French rival Hermès reported that global sales had increased by nearly a quarter in the same period.
“LVMH is making the most of sustained European and American demand growth, while reaping the benefit of a rapid and strong rebound in Chinese spend,” analysts at Bernstein wrote.
After contracting sharply during Covid-19 lockdowns in 2020, sales in the luxury sector recovered to €1.15tn in 2021 — and defied expectations in 2022 by growing a further 20 per cent, according to consultancy Bain.
Caroline Reyl, head of premium brands at Pictet Asset Management, said she expected a big rebound from the Chinese consumer as one of the main growth drivers of the luxury industry this year, after a difficult 2022, but “the question was at what pace”.
“Double-digit growth from China is encouraging,” she said. “2023 is going to be a good year for luxury. There are too many drivers we can’t ignore.”
While the sector as a whole has done well, LVMH’s growth has outpaced the competition. It is now almost double the size in terms of market valuation of beauty group L’Oréal, the world’s largest cosmetics company and the next biggest French-listed group. LVMH is also more than double the size of Hermès. Paris-listed Kering, which owns brands including Balenciaga and Gucci, is valued at €72.7bn.
The second and third-biggest companies on the benchmark European Stoxx 600 index are valued significantly lower than LVMH. Nestlé, the world’s largest food company, and Danish drugmaker Novo Nordisk have market capitalisations of €326bn and €272bn respectively.
France’s stock exchange, the Cac 40, has risen 17 per cent in the year to date as investors pile into luxury goods groups, with shares in LVMH, climbing 32.9 per cent so far this year.
L’Oréal’s stock has risen 31.1 per cent in the same period while shares in Hermès, the maker of the iconic Birkin bag, have jumped 39.4 per cent.
Additional reporting by Harriet Agnew in London