Is Ralph Lauren under LVMH?

May 23, 2023

Would a combination of the two global fashion juggernauts make sense?

The brand Ralph Lauren comes from the United States and its brand name is the name of its founder. This product range is very broad, which includes clothing, fragrances, accessories, jewelry, etc. It is dedicated to producing high-end casual or semi-formal clothing for men and women. The most classic is the classic polo shirt. The company is currently listed on the New York Stock Exchange.

LVMH is a very large company and is the largest luxury goods conglomerate in the world today. This brand is based in Paris, France. The group focuses on wine and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and boutique retail. The largest parent company is the familiar company Christine Dior, which has a share of about 40%. Brands we know such as Bulgari, Christian Dior and the popular LV are all owned by LVMH.

LVMH Stock Analysis : Behind European Luxury Powerhouse LVMH

I will compare the fundamentals from margins, revenue and growth, financial health, market capitalization, brand strength and market position, and creativity. Margins for each brand

When comparing the margins of two companies, there are several key aspects to consider. Such as gross margin and operating margin I will go through this part from these factors.

The gross margin is a profitability measure that looks at a company’s gross profit compared to its revenue or sales.a higher gross margin typically implies better profitability and financial health for a company.

We can see from these two graphs about the gross margin for each company. For 2019, the gross margin of RL is about 61%, for the LVMH, it is around 66%. During the 2020, both of their gross margins decreased .The gross margin of RL is about 59%, decreased by 2.65% . for the LVMH, it decreased by 1.69% from highest 66.23% to lowest 64.54%. After 2020, the gross margin was going to be better. For the 2021, the gross margin of RL was 66%, and during 2022, it kept the same level. For the LVMH, the gross margin increased very quickly, from 64% to 68%, and for the

2022, it also kept the same level as its in 2021. The reason why the gross margin decreased may be caused by the pandemic. The year 2020 was marked by the global COVID-19 pandemic, which severely impacted the retail and luxury goods sectors. Lockdowns, reduced consumer spending, disrupted supply chains, and store closures had a significant negative effect on sales and profitability for many companies, including RL and LVMH. These factors likely contributed to the decrease in their gross margins. As the global economy gradually recovered from the pandemic, consumer spending rebounded, and retail operations resumed, contributing to an improvement in sales and gross margins.

The operating margin: The operating margin measures how much profit a company makes on a dollar of sales after paying for variable costs of production,but before paying interest or tax. Higher ratios are generally better, illustrating the company is efficient in its operations：LVMH operating margin:

We can see the operation margin from the above graphs. these are similar with gross margin. Same year decreased and increased after the year. Gross margin and operating margin can exhibit similarities in their trends and movements. When a company effectively manages costs, both margins tend to increase. Conversely, if costs rise or revenues decline, both margins can decrease. However, It’s important to note that gross margin and operating margin provide different perspectives on a company’s profitability.

Revenue and growth

We can see that they have huge difference on revenue, for the LVMH, we can see that the revenue (for now) is 82.53B and the revenue of RL is 6.426B There are some reasons can explain it, for the main reason is that: Market Segment and Target Audience: Ralph Lauren primarily focuses on the premium and luxury fashion market, with a product range that includes apparel, accessories, and home furnishings. LVMH, on the other hand, operates in a broader range of sectors, including fashion, leather goods, perfumes, cosmetics, wines, and spirits. LVMH owns multiple luxury brands such as Louis Vuitton, Christian Dior, Givenchy, and Moët & Chandon, catering to a wider range of consumer preferences and price points.

The global Presence and Market Reach is another reason : LVMH has a strong international presence with a wide global distribution network. The conglomerate benefits from its extensive retail network, including company-owned stores, franchises, and partnerships. Its brands have a strong presence in major fashion capitals and luxury shopping destinations worldwide. In comparison, while Ralph Lauren has a global presence, its retail footprint may be comparatively smaller and more focused.

They are all growing but the scale is kind of different and caused a huge difference in revenue.

P/E ratio is one of the ways to value this company:The P/E ratio is used to evaluate the valuation of a company’s stock. The P/E ratio provides insight into how much investors are willing to pay for each dollar of the company’s earnings. A higher P/E ratio suggests that investors have higher expectations for future earnings growth, while a lower P/E ratio may indicate lower growth expectations or undervaluation. For the RL, the P/E ratio

As we can see, their P/E ration were both dropped drastically, may be caused by same reason(pandemic)

Ralph Lauren is known for its brand positioning in the high-end and luxury segment of the fashion industry. The brand has a classic American aesthetic: , such as preppy Ivy League style, equestrian influences and the ruggedness of the American West. Ralph Lauren is more than just a fashion brand; it has positioned itself as a lifestyle brand, offering a variety of products beyond clothing. The brand extends into categories such as accessories, fragrances, home furnishings, and even hotels. Although Ralph Lauren offers products at different price points, it is primarily positioned as a luxury brand. The brand’s high-end collections and prestigious collaborations showcase its commitment to craftsmanship, attention to detail and the pursuit of luxurious materials. This positioning is aimed at affluent consumers who appreciate luxury and exclusivity in their fashion choices.

However，LVMH itself has established a strong brand positioning in the luxury industry.Synonymous with luxury and prestige, LVMH’s brands are positioned at the top end of the market, catering to discerning consumers who seek a unique and exceptional luxury experience. The group has acquired and nurtured iconic brands such as Louis Vuitton, Christian Dior, Givenchy, Fendi, Moët & Chandon, Hennessy and TAG Heuer. This diverse portfolio of brands demonstrates LVMH’s expertise and dominant position in several luxury sectors, enabling it to satisfy a wide range of consumer preferences and capture different markets. LVMH has a global presence and a strong retail network.

The group’s combination of directly operated stores, franchises and partnerships allows it to reach consumers around the world.In conclusion, they are both good brands, they have similar lines of gross margin, operating margin, even the P/E ratio, which means, they have their own brand capitalization in different region, we can see all of the number in statistic, the reason why the statistic of LVMH always higher than RL is because the scale of the brand.

Written by Mengran Zhu!