WCM Stock in Focus | LVMH: How an ‘Intense’ Culture Supports a Growing Moat

A key focus of the WCM Quality Global Growth portfolio is to find quality global companies with durable, strengthening economic moats and corporate cultures aligned to this growth. An example of a company that demonstrates these characteristics is LVMH Moët Hennessy Louis Vuitton (LVMH).

LVMH is the world’s largest luxury goods conglomerate with a wide range of subsidiaries specialising in wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewellery, and other activities in culture and arts. LVMH are best known for brands such as Louis Vuitton, Givenchy, Hennessy, and Tiffany & Co. to name a few.

In this video Ryan Quinn, Client Portfolio Manager at WCM Investment Management (WCM) talks through how LVMH’s dominant market position is cemented through their unique business model, competitive advantages and growing economic moat.

Tom Hickey (TH): Hello and welcome to this ‘Stock in Focus’ with WCM Investment Management. My name is Tom Hickey and today I’m joined by Ryan Quinn. How are you, Ryan?

Ryan Quinn (RQ): Great Tom, happy to be here.

TH: Lovely. Today we’re going to be talking about LVMH. Can you give us an overview of this company and what they do?

RQ: Sure. Louis Vuitton or LVMH is the world’s largest luxury goods maker, boasting a dominant position in the marketplace. Consumers easily recognize the Louis Vuitton logo and its products, but may not know that businesses like Fendi, Dior, Veuve Clicquot, Belvedere Vodka and TAG Heuer are all lines of business owned by LVMH. All the brands have been in business for a very long time and they’re considered luxury by consumers. They share an aspirational quality to them, which lends themselves to being valuable and an exciting business to own.

TH: At WCM, you look closely at the competitive advantage of the companies you own and particularly how that’s changing over time. What’s your views on the competitive advantage of LVMH? Is it getting stronger or what are your views there?

RQ: LVMH has a wide moat thanks to the quality of the underlying businesses we just outlined and the tenure of their operation. Many of these businesses have been alive and selling products to the market for quite some time, which lends to the strength of the width of the moat.

The moat trajectory is positive and continues as the company continues to thoughtfully grow its product and geographical footprint. Most recently we saw this with LVMH acquisition of US-based Tiffany’s brand. This not only gives them another leg into the United States market but also provides an area of sale that they didn’t have previously in the silver market, which Tiffany’s has really dominated for some time.

TH: And tell us about the culture within the business and how that supports that moat trajectory.

RQ: LVMH’s culture has been described as very intense, which might sound off putting but really, we think it aligns with the competitive industry where they operate. The company is really influenced by the fact that it is family-owned to some degree as well. Bernard Arnault is very engaged in the market and has, what we call, skin-in-the-game, to make sure that the business continues to grow and thrives over time.

Despite the challenges being faced globally, we’re excited to own LVMH because as Bernard has said in the past, every time there has been a crisis, we have gained market share. We agree with that statement and we think LVMH will come out of this crisis stronger than it entered.

TH: Ryan, thanks very much for your time.

RQ: Cheers mate.

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