As I watched Ferrari fail to finish on the podium at the Emilia-Romagna Grand Prix at Imola (as the name suggests, a race where the stands were filled with wildly passionate Italian Ferrari fans), I was reminded that for all the glitz and glamour in the sport, the Ferrari share price has zero correlation with the Formula One team performance. They haven’t won a world championship since 2007, yet the Ferrari share price is up more than 780% since the IPO in 2015.
There’s a simple reason for this: Ferrari’s wealthiest customers don’t care about Formula One results. The most valuable customers are the ones who pay a fortune for highly personalised models — and those customers care about one thing and one thing only: exclusivity.
At least Ferrari’s involvement in the sport is core to the DNA of the brand. Over at LVMH, they must be struggling to justify the return on investment. Despite recent first-quarter results highlighting that Moët & Chandon is back for podium celebrations in Formula One (and thus a far-too-occasional overlap with the Ferrari brand), alcohol sales are under pressure. It also doesn’t seem to have helped much that the trophy trunk for all Grand Prix circuits is sponsored by Louis Vuitton, with the brand also acting as the title partner of the Australian Grand Prix, as Louis Vuitton’s first-quarter sales were down.
The LVMH share price has been a misery over 12 months, having shed 35% over a period in which Ferrari is up 16%. Hermès is up 12%, with the brand never having been associated with Formula One. Perhaps true luxury really does whisper rather than shout. Or, leaving aside the motorsport links (or lack thereof) for a moment, perhaps these companies aren’t nearly as comparable as many people think.
Richemont is often spoken of in the same breath as LVMH, yet the Rupert empire has had share price growth of 22% over 12 months (in euros for comparative purposes) — a spectacular outperformance against LVMH. This is despite poor numbers in China, with growth in other regions giving shareholders something to hang onto. Again, is LVMH really comparable to Richemont?
The market is finally realising that LVMH isn’t the luxury group many have believed for so long
The market is finally realising that LVMH isn’t the luxury group many have believed for so long. The most exclusive scale brand in the group is Louis Vuitton, but you can go to any major international airport and shop for those products to your heart’s content. To buy a Birkin bag from Hermès or a limited-edition Ferrari, you have to be a longtime customer and you need to be invited to spend an absolute fortune to get your hands on the product. This is the difference between luxury and exclusivity.
Richemont is arguably closer to being an exclusive brand than a luxury brand. Many of its jewellery and watchmaking maisons have names we mere mortals have never heard of and certainly can’t pronounce correctly. It does have some more mainstream stuff as well, but that still comes at very high price points.
As for LVMH, its business has headed the other way, building growth stories in goods for the affluent rather than the luxury market. Moët & Chandon is a costly way to make a toast, but you can buy the stuff at your local bottle store. Hennessy is also easily located behind the bar at most upmarket restaurants. Affluent? Sure. Luxury? Absolutely not. LVMH’s alcohol business is a particular stress for investors, with segmental revenue down 9% in the first quarter of 2025.
This is far from being the only issue though, as alcohol is the smallest segment in LVMH. The all-important fashion and leather goods segment (where you’ll find Louis Vuitton and several other brands) suffered a drop in revenue of 5%. Perfumes and cosmetics fell 1%, watches and jewellery came in flat and selective retailing (Sephora and a few others) fell 1%. Overall, the group’s organic revenue fell 3% for the quarter, which just won’t do.
The shift in market sentiment is evidenced by LVMH’s revenue multiple of below three, well off its five-year average of 4.9. Richemont is trading at five, and Ferrari (11.6) and Hermès (17.9) are in a different postcode altogether. The more exclusive the brand, the higher the multiple. The more that LVMH’s growth engines have an affluent rather than exclusive flavour, the greater the divergence in performance will be. And once you layer on all the succession concerns at LVMH, it becomes even harder to justify it as a long position in this sector.
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