In an article published January 31, 2013, Bernard Arnault, the chief executive of LVMH1, was quoted as saying, “The cloud on the horizon … is the evolution of currencies, [and a strong euro]would have an impact on French exporters and for our group …”2
These were prescient remarks. On this date the euro was at about $1.36, and it was in a general strengthening trend through about the first half of 2014—not helpful for European multinationals looking for their exports to be competitive3.
End of 2014 Offers a New Outlook
In opening the annual results presentation for 2014 on February 3, 2015, Mr. Arnault hinted at a new environment, saying:
There was a change during the year. And in the second half, the euro managed to decline, which hadn’t happened for a number of years, and this made our products more competitive, and for French exporters in general, it was very buoyant. Furthermore, the economy at the end of the year was somewhat boosted by two factors: the drop in the price of oil and more recently by the injection of liquidity into the European economy.4
Mapping the Inflection Point—4Q14
In looking at how the revenue picture at LVMH evolved in 2014, it’s clear that the weakening of the euro in the second half of the year had a material impact.
LVMH’s Quarterly Evolution of 2014 Revenue (as of 12/31/2014)
• First Half of 2014—Euro Strength: On December 31, 2013, the euro was at about $1.37. While it certainly fluctuated—hitting about $1.39 in early May 2014—it was still at about $1.37 on June 30, 2014.5 As can be seen, this had a negative impact on LVMH’s revenue.