Analysis Of Financial Statements Of Lvmh In Comparison To Ppr And Richmont

4108 words - 16 pages

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World leader in luxury; this is how Louis Vuitton - Moet Hennessy (LVMH) introduces itself. The holding company created in 1987 after the champagne producer Moet et Chandon and Hennessy merged with fashion house Louis Vuitton (LV). The group includes more than 60 sub companies mostly operates autonomous and 2300 stores in its retail network worldwide.

The company's fundamental values, shared by all the stakeholders: (LVMH, 2008)

Be creative and innovate

Aim for product excellence

Bolster the image of our brands with passionate determination

Act as entrepreneurs

Strive to be the best in all we do

The company nowadays has about 77000 (LVMH, 2008) employees, which only 26% are working inside France which is the base country of LVMH.

During the year 2008 the company shows the revenue of €17,193 billion, operating income of €3,485 billion and the profit of €2.026 billion.

Considering the current recession in the world economy these numbers should be carried out by a very strong managerial team which was our main persuasion for choosing LVMH to evaluate its yearly financial reports.

This project aims to analyze the LVMH financial report as a single company and in comparison to the year before (2007) and benchmark it with Pinault-Printemps-Redoute (PRR), the main same size competitor of LVMH in retail of luxurious goods. (Richmont (financial year ends in31 march 2009) as a smaller size competitor may be used as the second base for benchmarking in some areas as well as using the flow of the stock price during the financial year and try to link it with the financial situation and financial decision token by the company)

Revenue

The company shows %4.32 increase in revenues. The other two main competitors PPR and Richmont show increase of %5.76 and %2.00 respectively. The higher increase in PPR numbers is the result of their higher diversification and target groups. Sub companies of PPR unlike the ones owned by LVMH which are limited to high end of the market and targeting the people who r interested in luxury, target lower income levels of people parallel.

The numbers in chart 2 indicate that the percentage of earned revenue has been shift from the west to east excluding Japan. Except than the financial crisis the other reason is the expansion of distribution channels in these areas. The company started to enter the new markets in Asia Pacific area which improve the percentage of revenues from mentioned areas.

Profit

Almost no increase in profit mainly as a result of increase in marketing and administrative expenses and increase in company`s cost of financial debt. Considering the notes of financial reports this increase is the result of expansion of retail network and in the same time expenses of advertising and campaign in media and in the sales point. The number of stores has increased from 2048 in the end of 2007 fiscal year to 2314 in the end of 2008 fiscal year.
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