I. Overview of LVMH business

LVMH (Louis Vuitton Moet Hennessy) is the world's largest multinational luxury group, headquartered in Paris, France. It was formed by the merger of Louis Vuitton, a fashion leather goods company, and Moet Hennessy, a famous wine group, in 1987. In the process of development, it has conquered cities and territories around the world, constantly expanding its business scope and sales channels. At present, it has established five mature luxury business lines of fashion and leather goods, wine and spirits, perfumes and cosmetics, watches and jewelry, and boutique retail, as well as a sales network of more than 5000 stores, with 75 well-known quality brands, including world-renowned LV and Dior.

LVMH's main business includes fashion and leather goods, wine and spirits, perfumes and cosmetics, watches and jewelry, and boutique retail.

• Fashion and leather goods: star business, which also accounts for the highest proportion of revenue and profit. It originated from the Louis Vuitton brand founded in Paris in 1854 by Louis Vuitton, one of the most outstanding leather designers in French history. The department's core brands include LouisVuitton, Dior and Fendi, while second-tier brands include Celine, Givenchy, Loewe and so on.

• Wine and spirits: traditional business, stable market position. Mo Hyatt Champagne merged with Hennessy cognac in 1971 to form Mo ë t Hennessy Group. The department's core brands include Moet Champagne, Don Perignon and cognac Hennessy, as well as Cook Champagne, Quaker Champagne and so on.

• Watches and jewelry: make efforts to make up for deficiencies, is expected to become a new growth engine. The division was established in 1999 and the core watch brands include Hublot, tag Heuer and Zhenli, while the core jewelry brands include Bulgari and Tiffany, and the completion of the acquisition of Tiffany in 2021 will inject a boost to the group's jewelry sector.

• Perfume and cosmetics: broad sales network and continuous innovation ability constitute the core competitiveness. The department's core brands include Dior and Guerlain, while second-tier brands include Givenchy and Bei Lingfei, which have strong innovation ability and maintain brand attractiveness.

• Boutique retail: it is a distribution channel controlled by the group, which is conducive to vertical integration within the group. The core brands include DFS and Sephora.

LVMH has formed a remarkable influence around the world through global business expansion. LVMH acquires well-known brands located all over the world, and its raw materials are supplied and sold all over the world. at the same time, it also absorbs the cultural essence of different regions, enriches and deepens the brand image, thus attracting high net worth consumers from all over the world and consolidating its market position. The global layout of the business also enables the company to better guard against the risk of economic fluctuations in a single region.

Second, outstanding performance in the first half of the year, strong demand for luxury goods after the epidemic, acquisition of Tiffany to improve the brand structure

In the first half of 2021, the LVMH Group achieved revenue of 28.665 billion euros, an increase of 56 percent over the same period last year and 14 percent over the same period in 2019. The net profit belonging to the LVMH Group was 5.29 billion euros, an increase of 62 percent over the same period in 2019 and 9.25 times that of the first half of 2020.

In terms of business, revenue from the wine and spirits division was 2.705 billion euros, up 36% from the same period last year. Revenue from the fashion and leather division of the two core brands, Louis Vuitton and Dior, was 13.863 billion euros, up 74% from the same period last year; revenue from the perfume and cosmetics division was 3.025 billion euros, up 31% from the same period last year; and revenue from the watch and jewelry division was 4.023 billion euros, up 205% from the same period last year. Revenue from the boutique retail division was 510 million euros, up 5 per cent from a year earlier.

The main reasons for the higher-than-expected results are as follows:

(1) Last year, the base affected by the epidemic was low, but this year, the global epidemic prevention blockade has been continuously relaxed, allowing stores to reopen, stimulating people's demand for luxury goods. At present, the luxury goods industry is recovering from the epidemic. Apart from the strong rebound in the Chinese market, the lifting of city closures in most parts of Europe has also stimulated local demand.

(2) Fashion and leather goods, LVMH's largest business division, achieved record sales in the first half of 2021, up 81 per cent year-on-year and 38 per cent over the same period in 2019. Its brands Louis Vuitton, Dior, Fendi, Loewe and Celine all have unprecedented outstanding performance and are expanding their market share in all regions.

(3) income in Asia and the United States continues to grow, while Europe gradually recovers.

(4) successful integration and acquisition of Tiffany (acquisition of American jewelry brand Tiffany in January 2021)

(5) since the beginning of this year, some top brands in LVMH Group have made a profit by raising their prices sharply, which is between 5% and 6%.

III. The future development strategy will continue to strengthen the brand structure and consolidate the leading position.

LVMH Group will continue to strengthen the influence of its brand by relying on the excellent quality of its products and strong distribution network. In 2021, LVMH will once again consolidate its position as a global leader in luxury goods. In the first half of this year, with the exception of the acquisition of Tiffany, LVMH expanded differently in each of its business divisions.

• In April 2021, LVMH Group acquired a 6.8 per cent stake from Diego Della Valle, founder and chairman of the Tod's brand, and upon completion of the deal, LVMH Group's stake in the Tod's brand will increase from 3.2 per cent to 10 per cent.

• In July 2021, LVMH Group invested in the brand of the same name launched by Phoebe Philo, the former creative director of C é line.

• In June 2021, LVMH acquired the remaining shares of the Emilio Pucci brand and completed its 100% holding of the Emilio Pucci brand.

• On July 20th, LVMH announced the acquisition of a majority stake in Off-White. Off-White is a street clothing brand founded by Vuitton menswear designer Virgil Abloh. Upon completion of the deal, LVMH will own 60 per cent of Off-White and the remaining 40 per cent will belong to Virgil Abloh. He will also retain his position as creative director of the brand. At the same time as the announcement of the acquisition of a majority stake in Off-White, LVMH also announced a deeper partnership with Virgil Abloh, which "will use the expertise of the LVMH Group to create new brands or work with other brands outside the fashion sector". LVMH described this as a "significant expansion" of the partnership with Virgil Abloh. While the identity and responsibilities of creative directors of luxury brands have been changing over the past few decades, and the model of collaboration between designers and brands is also iterating, this time LVMH and Virgil Abloh may give a new solution.

With the acquisition of high-quality brands by LVMH Group in various fields this year, the capabilities of luxury giants continue to increase, and their business shortcomings are gradually made up, which is expected to bring a new growth engine for this year's performance; but at the same time, we should pay attention to the repeated global epidemic and the setback of consumer confidence.