Beyoncé just signed a partnership with this luxury brand, with 1,320% all time. Is the stock a no-brainer purchase?

You might think that owning a fancy watch or expensive clothing is the best way to add some luxury to your life. I would say such purchases are not worth it though. Fashion trends change quickly and at the end of the day, all clocks tell the same time.

Instead, you might want to consider investing in luxury brands instead of wearing them. One of the best examples I can think of in the luxury space is LVMH Moët Hennessy (LVMUY -0.13%). The stock has a total total return of over 1,300%, but it’s actually down about 18% in the last six months.

The best part? I think now looks like a great opportunity to take advantage of the low price action and get into the stock.

Let’s dig into Louis Vuitton’s entire business and explore how the company’s latest venture with global icon Beyoncé could help usher in a much-needed turnaround.

A close look at Louis Vuitton’s business

LVMH is much more than a handbag company; is a conglomerate that operates in perfumes and cosmetics, watches and jewelry, clothing and alcohol. The table below shows the revenue and operating profit trends of LVMH’s various business segments in the first six months of 2024.

Data source: LVMH Moët Hennessy.

The table above illustrates that LVMH’s weakest activity through 2024 is wines and spirits. Revenue and operating profit fell 12% and 26%, respectively, in the first six months of 2024 compared to the first half of 2023.

Management attributed these declines to general pullbacks in consumer spending, a volatile retail environment and a tough economic market in China.

However, in the company’s letter to shareholders, LVMH management wrote that it is focusing on “pursuing growth opportunities and enhancing the desirability of their brands” to reignite growth in the spirits business.

And with that, Beyoncé will take center stage.

Why I think the Beyoncé partnership is a home run

In late August, Beyoncé announced the formation of a joint venture with LVMH’s spirits subsidiary Moët Hennessy. By collaborating, Beyoncé and LVMH have created a new whiskey brand called SirDavis. I think this is a smart move by LVMH and I see the company benefiting beyond intangibles like the star power that Beyoncé brings to the table.

In recent years, many celebrity-owned spirits companies have seen immense success. For example, in 2017, actor George Clooney sold his tequila company, Casamigos Diageo for a reported $700 million plus an additional $300 million in potential payouts. Furthermore, former wrestler and current Hollywood actor Dwayne “The Rock” Johnson has seen notable success with his brand Teremana Tequila, which works closely with German liquor giant Mast Jägermeister.

In addition, Ryan Reynolds, a face of the Marvel Cinematic Universe, sold Aviation Gin to Diageo in 2020.

When it comes to whiskey in particular, there have been a number of celebrities involved with the spirit. Legendary folk singer Bob Dylan, Oscar-winning actor Matthew McConaughey and soccer superstar David Beckham have each created or promoted whiskey brands. However, it’s important to note that Beckham’s endorsement deal with Diageo ended last year, while McConaughey’s relationship with Wild Turkey ended in 2022.

So while other spirits have been endorsed by many celebrities and seen successful results, I think Beyoncé and LVMH have identified a unique pocket of the spirit realm that seems ripe for disruption.

Image source: Getty Images.

Should You Invest in Louis Vuitton Stock?

The chart below illustrates LVMH’s growth by geographic region. Excluding Japan, the company’s growth was nominal for much of 2024 — particularly in the US and Europe. As mentioned above, LVMH also faced some pressure in China in particular.

Image source: LVMH.

Variables including the US and European elections, persistent inflation and a mixed view of consumer purchasing power are all likely to have an impact on LVMH’s share price action right now.

But that said, I think the sales over the last six months are overblown. As a luxury retailer, LVMH doesn’t have to worry too much about inflationary pressures. Furthermore, as a conglomerate, the company is highly diversified, which provides the ability to generate growth from many different areas that influence consumer trends.

I am optimistic that the company makes selective decisions and invests in the right areas. I see the partnership with Beyoncé as a positive sign that management understands where LVMH needs to rejuvenate growth and is making highly specific decisions about how to do so. For all of these reasons, I still see LVMH stock as a straightforward buying opportunity and believe that gains are highly anticipated for long-term investors.