Analysis of LVMH

Résumé du document

The LVMH (Moet Hennessy Louis Vuitton SA) luxury brand has the following shareholder capital structure described in Figure 1-1 below. The main shareholders are the Group Arnault with 47% shares in personal property. 28% of the shares are held by foreign institutional
investors and 17% are held by French institutional investors. 5% of shares are held by individuals and 2% are treasury stock.

The Arnault Group has, due to the 47.6% of its shares of LVMH, a shareholder voting right of 63.64% of the total votes (LVMH, 2009). Due to this fact LVMH can be controlled with majority votes by the Arnault Group without dissension by other shareholder. Arnault focuses on long-term investment to create new values by investing money. On the other side, the minority shareholders are interested in high returns of investment by rising value of shares and high dividends. This perspective has a short term focus with a high profitability.

Because of the different perspectives of company behavior, the investment of money by Arnaults makes no sense, because he would support the passive minority shareholders in earning a higher profit without own investment. Further the position with majority vote by the Arnault Group can lead to a missing objectivity and transparency in control of LVMH by Arnaults interests. At the other side, the minority shareholder have no own majority to achieve their aims against the Arnault Group's opinion (Hanson, 2010).

Extraits

[...] As result of the investment analysis it is necessary to check the investment carefully and balance the risks. The mentioned investment into the minority shares of Moët Hennessy would be accounted in the LVMH balance sheet by a higher total asset value. Finally it is important to figure out the total value which could be generated for LMVH by the upper investment into Moët Hennessy. It is not only the low PER ratio, there are further advantages like free decision making and further investments without and conflict of shareholder interests. [...]

[...] This internationalization permits LVMH to counter the decrease of consumption in a situation of crisis and it permits also to be able to face the decrease in the mature countries. Indeed, we can see that LVMH did not suffer from the European crisis thanks to the increase of the Asian Market. Yet, the internationalization can represent a risk for the group LVMH because the sales outside the UE are not doing in Euros, or most of LVMH costs are in Euro. That can alter profitability because of the change rate. [...]

[...] It remains however significant and interesting for the shareholders. Indeed, by investing ¼LQ/90+WKHVKDUHKROGHUZLQVLQWKHRU\DSSUR[LPDWHO\¼ We can justify this decline of the financial profitability of the company by a decline of its debts, which tends to increase the net result. So, we notice a decline of the ratio shown through the financial leverage, the debt on the net result is thus eased, and the profitability for the shareholder is lesser. The PPR group as for him has a financial rentability around equal to the one of the LVMH group, it reaches in Financial performance 3.2 Study of the stock-exchange performance of LVMH: evolution of the price of stock exchange with comparison to a reference indication of the CAC40 and to one rival companies The stock-exchange performance of the group LVMH is rather good, in spite of a significant decline of the share over the year 2008 (Figure 3-1). [...]

[...] In fact, the structure of LVMH with multi holding, cross participations, the products to optimize the internationalization can make the audit difficult to be done. So as to make a good audit, the auditors should try to create different group of internal audit which will have to work and make an audit for a brand worldwide and then the brand but in a determined area. That could permit the group to analyse better the performance of the audit Resources 6 Resources 1. AFEP-MEDEF. (2010). Corporate Governance code of listed Corporations. Retrieved from http://el.grenoble-em.com/file.php/3704/Guide_AFEPMEDEF_An_18-11.pdfXXXXXXXXXXXXXXXXXXXXXXXX.pdf 2. Brigham, & Houston. [...]

[...] The economic assets consist of fixed assets and of the BFR. We thus have: Re = (760*2/3 / 8342) 6,07 Let us be now interested in the calculation of the economic profitability of the activity ³PRGH (fashion) and leather store (craft)": Re = (1986*2/3)/7168 = We notice a rather difference between both results. In fact, for in the activity "wines and spirit¼RISURILWVDUHEURXJKWRXW while for the same sum invested in the activity "mode (fashion) and leather store (craft)" the net The activity of the group is specialized in the production and marketing of luxury items. [...]