lvmh-urd-2019-va.pdf - FISCAL YEAR ENDED UNIVERSAL REGISTRATION DOCUMENT CONTENTS HISTORY 1 FINANCIAL HIGHLIGHTS 2 EXECUTIVE AND SUPERVISORY BODIES

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Unformatted text preview: FISCAL YEAR ENDED DECEMBER 31, 2019 UNIVERSAL REGISTRATION DOCUMENT CONTENTS HISTORY 1 FINANCIAL HIGHLIGHTS 2 EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS 5 SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF DECEMBER 31, 2019 6 MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: THE GROUP 9 THE LVMH BUSINESS MODEL 9 BUSINESS OVERVIEW, HIGHLIGHTS AND OUTLOOK 13 BUSINESS AND FINANCIAL REVIEW 35 ETHICS AND RESPONSIBILITY 49 ENVIRONMENT AND SUSTAINABILITY 73 ATTRACTING AND RETAINING TALENT 89 OUTREACH AND GIVING BACK 101 FINANCIAL AND OPERATIONAL RISK MANAGEMENT AND INTERNAL CONTROL 107 MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: LVMH PARENT COMPANY 123 BOARD OF DIRECTORS’ REPORT ON CORPORATE GOVERNANCE 135 FINANCIAL STATEMENTS 183 CONSOLIDATED FINANCIAL STATEMENTS 183 PARENT COMPANY FINANCIAL STATEMENTS: LVMH MOËT HENNESSY - LOUIS VUITTON 267 OTHER INFORMATION 299 GENERAL INFORMATION REGARDING THE PARENT COMPANY AND ITS SHARE CAPITAL; STOCK MARKET INFORMATION 299 PERSON RESPONSIBLE FOR THE UNIVERSAL REGISTRATION DOCUMENT; FINANCIAL INFORMATION 310 TABLES OF CONCORDANCE 315 This document is a free translation into English of the original French “Document d’enregistrement universel”, hereafter referred to as the “Universal Registration Document”. It is not a binding document. In the event of a conflict in interpretation, reference should be made to the French version, which is the authentic text. HISTORY Although the history of the LVMH group began in 1987 with the merger of Moët Hennessy and Louis Vuitton, the roots of the Group actually stretch back much further, to eighteenth-century Champagne, when a man named Claude Moët decided to build on the work of Dom Pérignon, a contemporary of Louis XIV; and to nineteenth-century Paris, famous for its imperial celebrations, where Louis Vuitton, a craftsman trunk-maker, invented modern luggage. Today, the LVMH group is the world’s leading luxury goods company, the result of successive alliances among companies that, from generation to generation, have successfully combined traditions of excellence and creative passion with a cosmopolitan flair and a spirit of conquest. These companies now form a powerful, global group in which the historic companies share their expertise with the newer brands, and continue to cultivate the art of growing while transcending time, without losing their soul or their image of distinction. From the 14th century to the present 14th century 1365 Le Clos des Lambrays 16th century 1593 Château d’Yquem 18th century 1729 1743 1765 1772 1780 Ruinart Moët & Chandon Hennessy Veuve Clicquot Chaumet 19th century 1815 1817 1828 1832 1843 Ardbeg Cova Guerlain Château Cheval Blanc Krug Glenmorangie Loewe Royal Van Lent Le Bon Marché Louis Vuitton Mercier TAG Heuer Jardin d’Acclimatation Zenith La Samaritaine Bvlgari Berluti Rimowa 1846 1849 1852 1854 1858 1860 1865 1870 1884 1895 1898 20th century 1908 1914 1916 1923 1924 1925 1936 1944 1945 1946 Les Echos Patou Acqua di Parma La Grande Épicerie de Paris Loro Piana Fendi Dom Pérignon Fred Le Parisien-Aujourd’hui en France Celine Christian Dior Couture 1947 1952 1957 1958 1959 1960 1969 1970 1972 1974 1975 1976 1977 1980 1983 1984 1985 1988 1991 1992 1993 1998 1999 21st century 2004 2008 2009 2010 2013 2016 2017 2019 Parfums Christian Dior Emilio Pucci Givenchy Connaissance des Arts Parfums Givenchy Starboard Cruise Services Chandon DFS Sephora Kenzo Cape Mentelle Perfumes Loewe Investir-Le Journal des Finances Ole Henriksen Benefit Cosmetics Belmond Newton Hublot Radio Classique Pink Shirtmaker Marc Jacobs Make Up For Ever Cloudy Bay Kenzo Parfums Fresh Colgin Cellars Belvedere Bodega Numanthia Terrazas de Los Andes Cheval des Andes Nicholas Kirkwood KVD Vegan Beauty Maison Francis Kurkdjian Woodinville Marc Jacobs Beauty Ao Yun Cha Ling Fenty Beauty by Rihanna Volcán de mi Tierra Fenty 2019 Universal Registration Document 1 FINANCIAL HIGHLIGHTS Key consolidated data 2019 (EUR millions) Revenue Profit from recurring operations Net profit Net profit, Group share Cash from operations before changes in working capital Operating investments Operating free cash flow (a) Equity (b) Adjusted net financial debt (c) (d) Adjusted net financial debt/Equity ratio (d) 2017 (1) 46,826 10,003 6,990 6,354 11,965 3,038 5,452 33,957 5,487 16.2% 42,636 8,293 5,840 5,365 10,405 2,276 4,696 30,377 7,153 23.5% 2019 2018 2017 Wines and Spirits Fashion and Leather Goods Perfumes and Cosmetics Watches and Jewelry Selective Retailing Other activities and eliminations 5,576 22,237 6,835 4,405 14,791 (174) 5,143 18,455 6,092 4,123 13,646 (633) 5,084 15,472 5,560 3,805 13,311 (596) Total 53,670 46,826 42,636 Change 2019/2018 2017 (a) (b) (c) (d) 53,670 11,504 7,782 7,171 16,105 3,294 6,167 38,365 6,206 16.2% 2018 (1) See the Consolidated cash flow statement in the consolidated financial statements for the definition of “Operating free cash flow”. Including minority interests. Excluding Lease liabilities and Purchase commitments for minority interests’ shares included in “Other non-current liabilities”. Excluding the acquisition of Belmond shares at end-2018. See Note 18.1 of notes to the 2018 consolidated financial statements. Information by business group Revenue by business group (EUR millions) Change in revenue by business group (EUR millions and percentage) 2019 2018 Published Organic (a) Wines and Spirits Fashion and Leather Goods Perfumes and Cosmetics Watches and Jewelry Selective Retailing Other activities and eliminations 5,576 22,237 6,835 4,405 14,791 (174) 5,143 18,455 6,092 4,123 13,646 (633) 8% 20% 12% 7% 8% - 6% 17% 9% 3% 5% - 5,084 15,472 5,560 3,805 13,311 (596) Total 53,670 46,826 15% 10% 42,636 (a) On a constant consolidation scope and currency basis. The impact of exchange rate fluctuations on Group revenue was +3% and the impact of changes in the scope of consolidation was +1%. The principles used to determine the impact of exchange rate fluctuations on the revenue of entities reporting in foreign currencies and the impact of changes in the scope of consolidation are described on page 39. Profit from recurring operations by business group (EUR millions) 2019 2018 (1) Wines and Spirits Fashion and Leather Goods Perfumes and Cosmetics Watches and Jewelry Selective Retailing Other activities and eliminations 1,729 7,344 683 736 1,395 (383) 1,629 5,943 676 703 1,382 (330) 1,558 4,905 600 512 1,075 (357) 11,504 10,003 8,293 Total 2 2019 Universal Registration Document 2017 (1) Information by geographic region Revenue by geographic region of delivery (as %) 2019 2018 2017 9 19 24 7 30 11 10 19 24 7 29 11 10 19 25 7 28 11 100 100 100 2019 2018 2017 22 29 7 5 37 22 29 7 6 36 23 30 7 6 34 100 100 100 Number of stores 2019 2018 2017 France Europe (excluding France) United States Japan Asia (excluding Japan) Other markets 535 1,177 829 427 1,453 494 514 1,153 783 422 1,289 431 508 1,156 754 412 1,151 393 Total 4,915 4,592 4,374 France Europe (excluding France) United States Japan Asia (excluding Japan) Other markets Total Revenue by invoicing currency (as %) Euro US dollar Japanese yen Hong Kong dollar Other currencies Total Data per share (EUR) 2019 2018 (1) 2017 (1) Earnings per share Basic Group share of earnings per share Diluted Group share of earnings per share 14.25 14.23 12.64 12.61 10.68 10.64 Dividend per share Interim Final 2.20 2.60 2.00 4.00 1.60 3.40 Gross amount paid for the fiscal year (a) 4.80 (b) 6.00 5.00 (a) Gross amount paid for the fiscal year, excluding the impact of the tax regulations applicable to the recipient. (b) Proposal by the Board of Directors at its meeting of April 15, 2020 for approval at the Shareholders’ Meeting of June 30, 2020. (1) The financial statements as of December 31, 2018 and 2017 have not been restated to reflect the application of IFRS 16 Leases. See Note 1.2 to the consolidated financial statements regarding the impact of the application of IFRS 16. 2019 Universal Registration Document 3 4 2019 Universal Registration Document EXECUTIVE AND SUPERVISORY BODIES; STATUTORY AUDITORS Board of Directors Executive Committee Performance Audit Committee Bernard Arnault Chairman and Chief Executive Officer Bernard Arnault Chairman and Chief Executive Officer Yves-Thibault de Silguy (a) Chairman Antonio Belloni Group Managing Director Antonio Belloni Group Managing Director Charles de Croisset (a) Antoine Arnault Delphine Arnault Louis Vuitton Delphine Arnault Nicolas Bazire Sophie Chassat (a) Charles de Croisset (a) Lead Director Diego Della Valle (a) Clara Gaymard (a) Iris Knobloch (a) Marie-Josée Kravis (a) Marie-Laure Sauty de Chalon (a) Yves-Thibault de Silguy (a) Natacha Valla (a) (b) Hubert Védrine (a) Advisory Board members Yann Arthus-Bertrand Paolo Bulgari (c) Lord Powell of Bayswater (d) Nicolas Bazire Development and Acquisitions Pietro Beccari Christian Dior Couture Michael Burke Louis Vuitton Chantal Gaemperle Human Resources and Synergies Jean-Jacques Guiony Finance Christopher de Lapuente Sephora and Beauty Philippe Schaus Wines and Spirits Sidney Toledano Fashion Group Clara Gaymard (a) (e) Nominations & Compensation Committee Charles de Croisset (a) Chairman Marie-Josée Kravis (a) Yves-Thibault de Silguy (a) Ethics & Sustainable Development Committee Yves-Thibault de Silguy (a) Chairman Delphine Arnault Marie-Laure Sauty de Chalon (a) Jean-Baptiste Voisin Strategy Hubert Védrine (a) General Secretary Statutory Auditors Marc-Antoine Jamet ERNST & YOUNG Audit represented by Gilles Cohen and Patrick Vincent-Genod MAZARS represented by Isabelle Sapet and Loïc Wallaert (a) (b) (c) (d) (e) Independent Director. Appointment as a Director proposed at the Shareholders’ Meeting of June 30, 2020. Until the Shareholders’ Meeting of June 30, 2020. Appointment as an Advisory Board member proposed at the Shareholders’ Meeting of June 30, 2020. Appointment as a Committee member to replace Antoine Arnault effective June 30, 2020. The list of Directors’ appointments can be found in §1.4.1 of the Board of Directors’ report on corporate governance on pages 145 to 155 of the Universal Registration Document. 2019 Universal Registration Document 5 SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF DECEMBER 31, 2019 LVMH Diageo 34% 66% 99.9% MOËT HENNESSY Moët & Chandon Dom Pérignon Mercier 99% 100% Ruinart LV GROUP Hennessy Louis Vuitton Belvedere Berluti 100% 100% Guerlain Kenzo Parfums 100% Ardbeg Veuve Clicquot 100% Kenzo Domaine Chandon Terrazas de los Andes Givenchy Fenty 100% Newton Vineyards 90% 50% Cheval des Andes (*) Cape Mentelle 100% 50% Volcán De Mi Tierra (*) 100% Château du Galoupet 100% 100% 55% Celine Numanthia Termes Cloudy Bay Woodinville Château d’Esclans (*) Accounted for using the equity method. 6 Chaumet Fred 100% 100% Christian Dior 100% 100% Parfums Christian Dior 100% 100% Glenmorangie Krug 100% 2019 Universal Registration Document 100% Parfums Givenchy 100% Make Up For Ever 100% 100% Sephora excl. USA 100% La Samaritaine 99% Bvlgari Le Bon Marché 100% La Grande Épicerie de Paris 50% 100% 100% The objective of this chart is to present the direct and/or indirect control structure of brands and trade names by the Group’s main holding companies. It does not provide a complete presentation of all Group shareholdings. n Holding companies n Brands and trade names 100% 100% OTHER HOLDING COMPANIES SOFIDIV 100% 95% 100% Fendi Pucci Acqua di Parma 99% 100% 100% 100% LVMH BV LVMH Inc. Royal Van Lent Benefit Loewe Fresh 100% Les Echos Starboard Cruise Services 100% 100% 100% 61% DFS USA Marc Jacobs 80% 100% Sephora USA Colgin Cellars 60% Le ParisienAujourd’hui en France 100% 100% Investir 100% Le Journal des Finances Radio Classique 100% SID Editions 100% Belmond 100% LVMH 100% Hotel Management Pink Shirtmaker Loro Piana 100% 85% Perfumes Loewe Zenith Ole Henriksen 100% 100% Connaissance 100% des Arts 61% 69% 70% 49% Thelios 51% 70% Hublot Mezzo Fenty Beauty 80% 100% TAG Heuer KVD Rimowa 50% Château d'Yquem 96% 50% DFS excl. USA Nicholas Kirkwood Repossi Cova Patou Pelham Media Limited 52% 80% 77% Château Cheval Blanc (*) Domaine du Clos des Lambrays Maison Francis Kurkdjian 50% 100% 61% Stella McCartney (*) 2019 Universal Registration Document 7 8 2019 Universal Registration Document MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: THE GROUP The LVMH business model 1. BUSINESS OVERVIEW 10 2. GROUP VALUES 12 3. OPERATING MODEL 12 2019 Universal Registration Document 9 MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: THE GROUP The LVMH business model The LVMH group was formed from the merger of Moët Hennessy and Louis Vuitton in 1987. Bernard Arnault became the leading shareholder and Chairman and Chief Executive Officer in 1989, with the ambition of making LVMH the world leader in luxury. Today, the LVMH group has built its leading position through a unique portfolio of 75 exceptional Maisons, operating in six business groups. Each of them creates products that combine high-level expertise with a strong heritage, drawing their 1. The Group helps its Maisons grow over the long term, based on respect for their specific strengths and individuality, underpinned by common values and a shared business model. Accordingly, it provides them with all of the resources they need to grow in terms of designing, manufacturing and selectively retailing their products and services. BUSINESS OVERVIEW LVMH is the only group that operates simultaneously, through its Maisons, in all the following luxury sectors: Wines and Spirits: Based in Champagne, Bordeaux and other renowned wine-growing regions, the LVMH group’s Maisons – some of which are hundreds of years old – all have their own unique character, backed by a shared culture of excellence. The activities of LVMH in Wines and Spirits are divided between the Champagne and Wines segment and the Cognac and Spirits segment. This business group focuses on growth in high-end market segments through a powerful, agile international distribution network. LVMH is the world leader in cognac, with Hennessy, and in champagne, with an outstanding portfolio of brands and complementary product ranges. It also produces high-end still and sparkling wines from around the world. Fashion and Leather Goods: LVMH includes established Maisons with their own unique heritage and more recent brands with strong potential. Whether they are part of Haute Couture or luxury fashion, LVMH’s Maisons have based their success on the quality, authenticity and originality of their designs, created by talented, renowned designers. All the Group’s Maisons are focused on the creativity of their collections, building on their iconic, timeless lines, achieving excellence in their retail networks and strengthening their online presence, while maintaining their identity. Perfumes and Cosmetics: LVMH is a key player in the perfume, makeup and skincare sector, with a portfolio of world-famous established names as well as younger brands with a promising future. Its Perfumes and Cosmetics business group boasts exceptional momentum, driven by growing and securing the long-term future of its flagship lines as well as boldly developing new products. The Maisons cultivate their individuality, 10 momentum from a spirit of innovation and openness to the world. 2019 Universal Registration Document a differentiating factor for their followers in a highly competitive global market. At the same time, they are all driven by the same values: the pursuit of excellence, creativity, innovation and complete control of their brand image. Watches and Jewelry: The Maisons in Watches and Jewelry – LVMH’s youngest business group – operate in the high-end watchmaking, jewelry and high jewelry sectors. It features some of the most dynamic brands on the market, positioned to complement each other’s strengths. These Maisons rely on their outstanding expertise, creativity and innovation to surprise their customers all over the world and respond to their aspirations. Selective Retailing: The Group’s Selective Retailing brands all pursue a single objective: transforming shopping into a unique experience. From elegant interior design to a specialist selection of high-end products and services, combined with personalized relationships, customers are the focus of their attention on a daily basis. Operating all over the world, the Maisons are active in two spheres: selective retail and travel retail (selling luxury goods to international travelers). Other activities: The Maisons in this business group are all ambassadors for culture and a certain art de vivre that is emblematic of LVMH. This approach is taken by Maisons including the Les Echos group, which – in addition to Les Echos, the leading daily financial newspaper in France – owns several business and arts titles; the Royal Van Lent shipyard, which builds and markets custom-designed yachts under the prestigious Feadship name; Belmond, which has a large portfolio of hotels, trains, cruise lines and safari lodges that combine heritage, expertise, authenticity and impeccable service; and the exceptional Cheval Blanc hotels, which operate worldwide. MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: THE GROUP The LVMH business model Key figures (as of December 31, 2019) 75 163,309 25 Maisons Maisons over 100 years old 41,287 employees worldwide joiners (1) 70 countries worldwide 4,915 stores worldwide Geographic presence (as of December 31, 2019) 535 stores 33,701 employees 1,177 stores 40,453 employees Europe (2) France 1,453 stores 38,109 employees Asia (3) 829 stores 31,483 employees United States 494 stores 12,172 employees 427 stores 7,391 employees Japan Other markets (1) Under permanent contracts. (2) Excluding France. (3) Excluding Japan. 2019 Universal Registration Document 11 MANAGEMENT REPORT OF THE BOARD OF DIRECTORS: THE GROUP The LVMH business model 2. GROUP VALUES In its quest for excellence, there are three fundamental values that drive the Group’s performance and ensure its long-term future. These are shared by everyone involved at LVMH, and inspire and guide their actions. They are one of its Maisons’ keys to success, anchoring them in the modern world and the society in which they operate. Delivering excellence: Within the Group, quality can never be compromised. Because the Maisons embody everything that is most noble and accomplished in the world of fine craftsmanship, they pay extremely close attention to detail and strive for perfection: from products to services, it is in this quest for excellence that the Group differentiates itself. Being creative and innovative: Creativity and innovation are part of LVMH’s DNA; throughout the years, they have been the keys to the Maisons’ success and the basis of their solid reputations. These fundamental values of creativity and innovation are pursued in tandem by the Group’s Maisons as they focus on achieving the ideal balance between continually renewing their offer while resolutely looking to the future, always respecting their unique heritage. Cultivating an entrepreneurial spirit: The Group’s agile, decentralized structure fosters efficiency and responsiveness. It encourages individuals to take initiative by giving everyone a significant level of responsibility. The entrepreneurial spirit promoted by the Group makes risk-taking easier and encourages perseverance. It requires a pragmatic approach and the ability to mobilize staff towards achieving ambitious goals. 3. OPERATING MODEL LVMH has implemented a unique operating model based on six pillars, which contributes to the Group’s long-term success by combining profitable growth, sustainability and a commitment to excellence. Decentralized organization: The structure and operating principles adopted by LVMH ensure that Maisons are both autonomous and responsive. As a result, they are able to build close relationships with their customers, make fast, effective and appropriate decisions, and motivate Group employees for the long term by encouraging them to take an entrep...
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