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LVMH (MCFP; Aa3/AA-) S&P comments after earnings; we see value in new 30s

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  • S&P's followed earnings this week commenting the co is "in good position to sustain its credit metrics at their current levels throughout 2024" - as expected given we see it gross ~1.4x levered incl. leases on NTM (-5% yoy) EBITDA and saw no major issues in 1H earnings.
  • S&P has (without naming) had a indirect dig at Kering; "Aspirational customers are now reducing their overall spending...having said that, LVMH has been able to retain a loyal base of high-end affluent customers thanks to its brand-elevation strategy. This explains its more resilient operating performance relative to that of some of its direct peers"
  • As we flagged (even before Kering earnings) LVMH directly called out weaker aspirational customer impacting (at the edge) its Tiffany brand in particular.

We were a bit surprised with the moves heading into and out of earnings. This is a double A rated, largest luxury retailer in the word, running a 26% EBIT margin and now 14-straight quarters of organic growth.

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  • S&P's followed earnings this week commenting the co is "in good position to sustain its credit metrics at their current levels throughout 2024" - as expected given we see it gross ~1.4x levered incl. leases on NTM (-5% yoy) EBITDA and saw no major issues in 1H earnings.
  • S&P has (without naming) had a indirect dig at Kering; "Aspirational customers are now reducing their overall spending...having said that, LVMH has been able to retain a loyal base of high-end affluent customers thanks to its brand-elevation strategy. This explains its more resilient operating performance relative to that of some of its direct peers"
  • As we flagged (even before Kering earnings) LVMH directly called out weaker aspirational customer impacting (at the edge) its Tiffany brand in particular.

We were a bit surprised with the moves heading into and out of earnings. This is a double A rated, largest luxury retailer in the word, running a 26% EBIT margin and now 14-straight quarters of organic growth.

Keep reading...Show less