The press has been buzzing about France's richest man, but this says more about the media than it does about the corporate culture of his empire, LVMH. Valued at a staggering 300 billion euros, LVMH thrives on a culture of secrecy. At MarketScreener, we pride ourselves on our independence. We don't do sponsored content, nor do we shower listed companies with undue praise. In fact, we often find ourselves on the receiving end of complaints from corporate communications departments, thanks to our critical approach. We would have loved to find some dirt on LVMH, but the company's stellar performance is hard to ignore.
Over the past twenty years, LVMH's sales have increased sevenfold, and its earnings per share have skyrocketed twentyfold. This impressive track record has led us to invest in the company through our European portfolio. LVMH's stock has traded at an average valuation of twenty times its profits over the past two decades, a period that includes two full economic cycles. Recently, however, the luxury goods sector has slowed down, and LVMH's market capitalization has been returning to this average valuation.
For more on this trend, see our latest articles on Burberry and Brunello Cucinelli. Between 2006 and 2016, LVMH's stock struggled to break through the twenty-times-profits ceiling. But since 2016, this level has become more of an average, if not a floor, with a new ceiling at thirty times profits. LVMH's growth and scale now justify a premium valuation. Today, LVMH oversees seventy-five unique and prestigious brands, a portfolio unmatched by its competitors.
The company's structure ensures resilience, with different segments able to support each other. LVMH's control over production, distribution, and marketing further strengthens its position. The clientele of LVMH's brands is less sensitive to economic downturns. Projections suggest that the luxury market will double in size over the next decade, with the number of ultra-high-net-worth individuals growing by 4% annually.
Louis Vuitton, LVMH's crown jewel, boasts remarkable pricing power. Since the pandemic, four-fifths of its growth has come from price increases rather than volume increases. This exclusive positioning is key to long-term success in the luxury goods industry. Bernard Arnault knows that exclusivity is essential for prosperity in this sector. Hermès, for example, may not have LVMH's scale, but it commands an average valuation of forty-five times profits over the past two decades.