Buying the LVMH Dip + 4xing our $

🧠 The Takeaways

Today we’re buying LVMH’s dip and going long on the Mega Luxury roll up.

1. Go on the hunt for new brands to roll into the portfolio.

2. Get into Cannabis to hedge the dying liquor biz.

3. Launch the LVMH fully branded luxury Apartments

+ Change how you manage your teams with the Traffic light system.

LBAB! Community - Traffic Light System

For anyone looking to improve (+ increase viz into) team performance, the Traffic Light System is the easiest and most effective way to know and track how everyone is doing.

Once you set your goals/OKRs (Objectives & Key Results - if you don't know what those are, go check out this book by John Doer, who invented them), the Traffic Light System is the best way to track weekly, monthly, and quarterly performance.

Here's how it works:

🔴 RED: Under 80% of goal. Hard miss. Drop everything and firefight.

🟡 YELLOW: 80-99% of goal. At risk. Monitor closely. Doesn’t require help yet.

 🟢 GREEN: 100%+ of goal. Looking good. Start planning for the future.

Why this system is so helpful:

1. Everyone has a common language on how things are going.

2. Everyone has clear priorities on what is and isn’t working.

3. You can create 1 dashboard to track everything and know what’s on fire.

I’ve brought this into every biz I’ve worked with for the past decade. 

It is the easiest way to set up the highest value activities.

If you're struggling with performance management as you scale, especially post-acquisition, this will change your business.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.

LVMH, the mega luxury powerhouse behind Louis Vuitton, Tiffany's, Sephora, and Christian Dior, is at a 50% discount from when we went long on it last year. 

• Share price: $114.52

• Market Cap: $284B

• L5 Performance: +50%

• P/E Ratio: 20x

LVMH is getting slaughtered in the public markets for slowing growth in China and a decrease in Sales and Profits. But with $10B in operating cash, they have the war chest to ride this out.

Financial Summary

I don’t ever say you HAVE to read the financial statements (that’s what I’m here for).

But you should REALLY read LVMH’s (Page 4-11). This is how summary reporting should be done. 🤤

• Essential high level info.

• Key metrics + simple graphs

• Concise summaries of the key groups with comparison data + summary commentary.

THAT is prime reporting for a biz.

TLDR Analysis: Painful Year, but they’re chugging along.

• Gross Margin fell to 67%. COGS rose faster than Rev. 😟

• G&A rose 9% ( fastest-growing metric) 👎

• Net Income fell hard. Everything’s the opposite direction of what we want. 😥

This is what weathering the storm looks like.

Sales declined. Product + Selling increased. Their stock got obliterated for it. But this is why you want to be an enormous biz. 

What did LVMH do against those headwinds?

They rebalanced their cash flow and debt position to strengthen their cash position. Adjusted segments of their biz and let the markets market.

This is where having a strong balance sheet (Assets vs. Liabilities) matters.

When times get tough, use or leverage your assets (turning them into liabilities).

Let’s Fix This Biz

Here are our 3 moves to 4x LVMH’s stock price.

1) Go on the Acquisition offensive

With Tariffs, trade wars, and economic uncertainty, there will be a lot of Luxury/perceived luxury brands trading at a discount that LVMH can scoop up.

Targets:

• Burberry: £2.4B (-46% L5)

• Capri Holdings (Versace, Jimmy Choo, Michael Kors): $1.7B (+6% L5)

• Canada Goose: $790m (-62% L5)

Not all will fit, but if LVMH snagged 1–2, they’d add a well-established luxury brand(s) to their portfolio at a discount.

Finding a brand that will endure for another 30 years and has a lot of potential to bounce back is a great “buy low” moment.

Takeaway: When you lead the industry, and it’s hurt… That’s your BFCM.

2) Get into Cannabis

This sounds insane for a Fashion Luxury behemoth, but they have to play the trends.

Wines & Spirits is LVMH’s lowest Rev & 2nd-lowest Profit category. Sales are declining YoY, and if consumers keep drinking less, they’re faced with an awkward choice:

1. Cut the Alcohol biz. (Super awkward considering 2 of their initials stand for Moët & Hennessy).

2. Expand this into the “Enjoyment” category (Alcohol + THC/CBD) + capture where the market is going.

There will be significant legal + brand complications across the major markets they sell in (Asia 37% of Rev / Euro 25%), but if they want this category to grow, they must adapt to younger people drinking less + GLP 1s reducing alcohol consumption.

There will be plenty of Premium Cannabis bizs that’d love to become a part of the LVMH empire.

If they don’t, the Wines & Spirits category will become a rounding error in their P&L.

Takeaway: Evolve your strengths around demographic trends.

3) Launch Fully Branded Hotels/Luxury Living

Costco is launching apartments over their stores. LVMH needs to do the same thing, but in the most luxurious way possible.

Buying hotels that are building Luxury apartments. This is the hottest trend in Luxury hotels right now.

The Dubai Estates, brought you to buy LVMH.

Fully furnished Luxury apartments ($15m+) completely outfitted with LVMH products.

• Closets full of their clothes/accessories

• Their soaps/perfumes in the bathrooms

• Bar stocked with their alcohols

• Stylists & Tailors on site

Basically, Disney World for insanely rich people.

They can tailor the experience past other players by custom designing the space for their products.

• Retrofit walk-in closets for their handbags/watches/shoes

• LVMH master stylists/tailors

• Restaurant + bar pairings using their ingredients

You can convert someone’s living space into a massive shop where room service turns into automatic reorders.

Takeaway: Become inescapable. Then remove all friction.

Final Thought

LVMH owns 75 Luxury houses across 5 major categories and some of the most storied names in the world. 

But they only highlight 2–3 brands per category.

There are probably ~20–25 brands in the LVMH portfolio that drive the overwhelming majority of growth + profit. The rest were acquired to reduce competition.

Which is a fascinating case study is taking losses as a competitive advantage.

Google does something similar with their talent, where they pay key employees not to work for competitors. They don’t have to continue working at Google either. But Google will pay them to sit on the bench for a year.

My guess: LVMH could cut the bottom 15–20 performing brands (or bundle them off + sell them) to become more profitable.

BUT they don’t want to because it’ll create more competition for them. Similar to how Facebook won’t sell Instagram.

I think it’d be better for the economy/consumer if there were another Luxury Group to compete with LVMH, Richemont (Cartier, Mont Blanc) and Kering (Gucci, YSL). 

But it’s a brilliant move if you can get away with it.

Carrying losses on your books (Tax write-offs) vs. increased Marketing/Sales costs going up against competitors is a better biz play.