Episode notes
Daniel Mahncke and Shawn O’Malley revisit the two luxury houses they passed on last time — Hermès (EPA: RMS), the 189-year-old maker of the Birkin bag, and LVMH (EPA: MC), the 75-brand conglomerate behind Louis Vuitton, Dior, Tiffany, and Hennessy. Both stocks now sit near their lows: Hermès is down more than 50% from its February 2025 peak and trades at 32 times earnings for the first time in a decade, while LVMH has fallen to a five-year low after two straight years of declining sales — something that didn’t even happen in 2009. The luxury industry has lost roughly 70 million customers since 2022, the Chinese market that tripled between 2017 and 2021 has been shrinking ever since, and a war in the Gulf emptied the stores on the Champs-Élysées of their best-spending tourists.
But some brands are growing. Daniel and Shawn work out why Richemont can grow 20% in the same quarter LVMH grows 3%, why Hermès still earns a 41% margin while LVMH’s fashion and leather division has given back seven points of margin in five years, and why the top 0.1% of luxury clients keep spending while the aspirational buyer walks away. They also cover the Chinese property bust and its five-to-six-year playbook, and how prior luxury downturns in 2009, 2016, and 2020 ended. In the end, Daniel updates both valuation models and decides whether either Hermès or LVMH finally earns a spot in The Intrinsic Value Portfolio.
IN THIS EPISODE YOU’LL LEARN:
(00:00:00) Intro
(00:02:35) About the state of the luxury market
(00:15:58) How Hermès’ business has done since our first pitch
(00:20:22) What makes LVMH and Hermès special
(00:31:30) How LVMH’s business has done since our first pitch
(00:33:23) How China is impacting the luxury market
(00:39:12) How long past luxury downturns were
(01:02:33) Why Hermès has an even better chance of recovering quickly
(01:09:10) Valuation discussion
(01:10:43) Intrinsic value of RMS
(01:12:26) Intrinsic value of LVMH
(01:12:51) Whether LVMH or RMS will be added to The Intrinsic Value Portfolio
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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- Original Episode on Hermès.
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