How to explain a Profit & Loss
During a Thanksgiving chat with family and friends, how would you explain the P&L of a company you are interested in? You do want to impress your uncle, who works as a banker at Goldman Sachs, but don’t want to bore the other people sitting at the table.
To explain it, try to split the P&L into the 3 main segments: sales, cost of sales, and expenses. The difference is Net Income. Use the % of sales ratios in your discussion.
See the short video on how to read a P&L here:
My Mother is an Architect. She likes to see things in visuals. More of a creative thinker and is also great at expressing her thoughts through
words. My Father is an Actuary. He likes to see numbers, data, and facts so that he can make rational conclusions and for things to make sense to him.
To explain Netflix, I’ll mention that Netflix is a movie and television, a streaming-based platform that is currently operating in over 190 countries.
Netflix currently has three monthly subscription plans: $8.99, $13.99, and $17.99 (These are the current prices for the United States.)
Unlike some of Netflix’s competitors, it does not have a parent company and is its own entity. This can be both an advantage and disadvantage in some cases.
SALES. The total amount of money that is made from selling the product or service. COST OF SALES The total amount of money that is needed to make the products. EXPENSES The other money that is needed for operation. NET INCOME The total amount of money that is made after all costs and expenses. I published the visuals on Linkedin.
Neither of my parents work in finance or really work with financial statements or numbers in their jobs so I would have to explain the Profits and Losses of Coca Cola in understandable terms. I would run them through Coca Cola’s most recent Profit and Loss Statement and highlight their sales (revenue), cost of sales (cost of goods sold), and expenses for the last year. I would run them through some examples of different expenses that a company like Coca Cola would have and how they translate into the Profit and Loss statement. I would then explain the definition of Net Income and how we come to it from deducting the cost of sales (cost of goods sold) and expenses from the total sales (revenue) for that year.
To avoid the infection of the pandemic, I will take 2018’s annual financial statement into consideration. 3M competitors include Autoliv, Owens Corning, and Office Depot. The net income ratio attributed to 3M remains steadily in 2015-2018 at around 16%. Generally compare these four companies, the most competitive aspect of 3M is that its quality of the products is always considered the best among the others. I would persuade the others that the most sustainable value in a manufacturing company is the product. The essential publicity is the experiences with the product. The strength of 3M can be proved by the other company’s preformance in a dynamic change between every years. For example, Owens Corning Inc annual net income for 2019 was $0.405B, a 25.69% decline from 2018, whereas 3M annual net income for 2019 was $4.517B, a 15.55% decline from 2018. According to Comparably rating website, 3M’s product quality gains 4 in 5 point when Autoliv gains 3, Owens Corning gains 3.8, and Office Depot gets 3.3. This is a very impressive advantage in the competition.
Add to my points above:
Autoliv 2018 operating income 686 ÷ total revenue 8678 = 8%
2019 725 ÷ 8547 = 8.5%
2020 382 ÷ 7447 = 5%
Owens Corning 2018 807 ÷ 7057 = 11%
2019 755 ÷ 7160 = 10.5%
2020 -138 ÷7055 = -2%
2021 1427 ÷ 8498 = 16%
Office Depot 2018 239 ÷ 11015 = 2%
2019 191 ÷ 10647 = 2%
2020 264 ÷ 9710 = -3%
3M 2018 7207 ÷ 32765 = 22%
2019 6138÷ 32136= 19%
2020 7151÷ 32184 =22%
I am from team Loral, both of my parents are not familiar with numbers and bits of knowledge related to finance. So it is kind of unpractical to use graphs and charts. I will try to relate Loreal’s P&L to their lives. Although due to the Covid epidemic, The annual net income is several percentages lower than last year. For instance, professional, consumer, and Lureal Luxe all present a negative number. On the other side, we need to consider the ear of globalization. Under the health crisis, the market is highly influenced by government and consumers’ purchase behavior. Loreal still keeps its high market share. Therefore the negative number is temporary, Loreal is still on the way to leading the global makeup and skincare market.
Explaining the P&L of Coca Cola at a dinner:
Having most of my family work in finance, I feel the need to impress them and show my knowledge of P&L of a company while using the correct terms. I would start by arguing that the pandemic has largely affected all industries but especially the food & beverage sector because of the disruption in supply chains, at home consumption increase, while out of home consumption went down, resulting in suppliers to buy less products etc. I would then talk about the net operating revenues which saw an increase of 17% in 2021 compared to 2020, which almost hit their “normal” income prior covid in 2019. Meanwhile, their gross profit increased by 18% from 2020 to 2021, being higher than their profits in 2019. Having said the above, I would explain how Coca Cola is turning their losses into profits after the pandemic, while focusing on the price increase of their products, and their room for growth in the market. I would also mention the competitors such as Pepsi co, who are also undergoing the same price increase evaluation worldwide. Stating that Coca Cola has an innovative supply chain in place, having factories in almost all the countries they sell in, reduces their cost in the shipping sector. The year of 2022 looks like a brighter year for all the food & beverage sector while creating more room for growth.
L’Oreal P&L:
At a Thanksgiving dinner, I would explain L’Oreal’s P&L to finance and non-finance family members in the following way. Since L’Oreal is a massive conglomerate, it is easier to break it down by product category for simplicity’s sake. I would begin by explaining 3 main segments: sales, cost of sales, and expenses.
For example: L’Oreal sells $500,000 worth of hairspray (sales). That is 125,000 units at $4 a unit. It costs L’Oreal $.95 to manufacture each unit, along with a variety of other costs that goes into creating/distributing the units. (expenses and cost of sales). That means L’Oreal profits $3.05 on 125,000 units bringing net profit to $381,250 (opposed to $500,000 revenue).
As my family has a background in finance, I would explain the finances about L’Oreal using details and examples. L’Oreal’s P&L is split into the 3 main segments: sales, cost of sales, and expenses. in 2019, sales were equal to 29.87 billion euros, cost of sales 8.06 billion euros, and profit 21.80 billion euros. This shows that the company had a great year in 2019, as their profit was higher than the cost of sales and the company was able to benefit. As the peak of the pandemic has caused a slight decrease in profit, the company continues to keep its high market share by currently investing in new partnerships and projects to increase its profit.
As my family has a background in finance, I would explain the finances about L’Oreal using details and examples. L’Oreal’s P&L is split into the 3 main segments: sales, cost of sales, and expenses. in 2019, sales were equal to 29.87 billion euros, cost of sales 8.06 billion euros, and profit 21.80 billion euros. This shows that the company had a great year in 2019, as their profit was higher than the cost of sales and the company was able to benefit. As the peak of the pandemic has caused a slight decrease in profit, the company continues to keep its high market share by currently investing in new partnerships and projects to increase its profit.
My cousins who are in grade 10 and 12 are just studying the basics of finance and accounting in school. To give them a break from the boring studies and still make it a useful discussion for them, I would give them a choice to either take a spring vacation and go to Disneyland OR Universal studios. The rule would be that they get to pick only one and they would have to justify to me why they chose what they did. Both of them being Harry Potter fans immediately choose universal.
So to talk them out of it and since I am in team Disney, I would explain to them that the prices of a Disney ticket for 3 days is cheaper per day than a Universal ticket for one day and that Disney parks has many more options apart from just Disney land
To further discuss the topic with them I would ask them why they think the prices for Disney and Universal are so different, hopefully opening a conversation of Profit Loss, the different areas where Universal could be spending more money on licensing as compared to Disney. How much profit each company would make out of them buying a one day ticket or even a seasonal pass instead. Explain to them how companies need to pay tax, their employees, etc and how that would cut into their profit.
We would discuss:
cost of sales, operating cost and the net income Disney or universal would get from selling Park tickets
Since both my parents have working experience on finance, I would explain the P&L of Nike to them by dividing it into three segment: sales, cost of sales, and expenses. In 2021, Nike’s sales were 44493 million dollars, cost of sales were 24588 million dollars, and net income were 5727 million dollars. It shows that Nike has increased its revenue and profit after the pandemic and its profit was 12.9% of its sales, which means Nike had a great year in 2021 and continued to increased its profit. As Nike had a little decreased in profit during the pandemic, the company keeps its high market share right now and increased its profit.
Coming from a family that majority of family members working on finance related field, I would explain Disney’s P&L in a following way. Disney’s revenue growth rate is increasing year by year; it has a complete entertainment industry chain, including media networks, park vacations, film and television, consumption and interactive entertainment; and the income of these five major industries is almost all on the rise. The increase was mainly due to service costs, and the increase in operating expenses was also very small, or even slightly decreased. Disney has a high annual revenue. For example, in 2019, the annual revenue of Disneyland was 3.8 billion US dollars, RMB 245.5 billion; daily revenue was about 10.4 million US dollars. Amusement parks usually have a very long payback period. First, the initial investment is huge. Shanghai Disney invested 5.5 billion US dollars in the early stage, equivalent to 30 to 40 billion yuan. Disney’s profit has never been mainly based on tickets. Disney’s main profit point is in the second match. Generally, in the per capita consumption of Disneyland, tickets only account for about 30% – 40%, and the rest are second match. Tokyo Take Disney Sea as an example. Tickets are about RMB 400, but the per capita consumption is basically about RMB 800-1,000.
It’s another year around the table during Thanksgiving with great food and aesthetically pleasing decor. Everyone wants to take a picture so they whip out their new iPhones and iPads they got after its release in September.
We sit down for dinner with music playing from the Apple TV and everyone starts talking about how great the new camera on the iPhone is, how well their Apple Watch workouts are recorded on the Activity app, and what they think Apple is going to do next. My dad, however, makes the statement that changes the course of conversation: “Imagine how much of our money must be in Apple’s pockets!”
I would go on to take this opportunity to explain Apple’s P&L statement by clarifying that the amount of money Apple makes selling these products and services to us is NOT the same as their net income. Afterwards, I would get down to explain why that is.
Apple makes $365,817 (in millions) selling us products and services. Let’s make this 100%.
It costs Apple $212,981 to produce these products and services. That’s 58% of their sales.
Now, they have to market these products and services to us combined with research. This and more is all a part of expenses which is $58,672 or 16% of their sales.
After you subtract the 58% and 16% out from the 100%, we’re left with 26%.
This means out of Apple’s $365,817 in sales, their net income is only 26% of that or about $95,113.
At this point, everyone is shocked that even though Apple brings in a 26% profit from their sales, they still find a way to reel us in and want to continue to buy their products!
During a Thanksgiving chat with family and friends, I would explain that overall, P&L is a financial statements that showcases the profit and loss of the company. The P&L has 3 main segments: sales, cost of sales, and expenses. I would be covering the 2019 P&L of L’oreal.
The net sales, also known as the total revenue is 29,873.6 million euros. The the cost of good sold which is also cost of sales, is 8,064.7 million euros.
At at last is the expenses total which is 16,234 million euros. The difference is Net Income of 5 547.5 millions euros. To calculate the percentages of sales ratio, you divide each segment with the net income total. sales is 54%, cost of sales is 26%, and expenses is 18%. This would be a simple way to calculate a P&L.
I would explain profit as the money you make after taking account of all the properties that make up the development, distribution and selling of a product or service. Let’s use Ulta as an example. Ulta sells beauty products but also provides services in its stores. This means they are a product and service based company. When looking into P&L, there are three components to find the profit & loss margin on a financial statement, which comprise of sales, the total amount of money made from selling their products and services, the cost of sales, which includes all of the added costs in selling the product (cost of selling and distributing the products and services) and expenses , which are all of the expenses and operating costs that contribute to producing the products and services. I would go through the ratios on the income statement, indication how sales compile 100% of the total, and the difference between sales and cost of sales and expenses is net Income, which is the profit made off of the product or service after all costs are accounted for. I would then use Ulta’s income statement from the latest annual report to divide up the ratios and visualize the % of sales its made or lost from the year prior.
The only person in my family who has experience in business or finance is my grandmother. I would explain to her that Disney’s P&L from 2018-2020 was increasing rapidly, until understandably going into net loss for 2020. From 2017-2018 the net sales growth is 8%, then from 2018-2019 the net sales growth is 17%, finally leading to a negative net sales growth of -6% from 2019-2020. Disney was rapidly expanding and increasing its their amount of expenses, particularly for products sold, jumping from 55% in 2018 to 60% in 2019. While Disney continued its increase in product cost, the administrative expenses jumped dramatically from 24% in 2019, to 37% in 2020. A significant part of this is the significantly higher restructuring cost for 2020.
In my family my mother has finance experience so I would like to explain L’Oreal’s profit and loss to her. The total revenue of L’Oreal is $29873.6. The cost of sales is $8064.7. The Net income is $3750. In 2019, there is an increase on total revenue. And a slight increase on cost of sales. As a result the net profit is decrease slightly. The company is still earning benefits, but the performance in 2019 is not better than 2018.
Pfizer Income Statement:
This is how I would explain Pfizer’s income statement to my family at Thanksgiving dinner. As both my parents are professional accountants, they can quickly understand the income statement. So I’ll try to show my family members Pfizer’s 2021 income statement. Then I’m going to divide it into sales, cost of sales and expenses.
Specifically, Pfizer accounted for 100% of 2021 sales of $81,288. Meanwhile, the cost of sales was $30,821, accounting for 38% of sales, and related expenses were $28,488, accounting for 35%. Net income was $21,979, representing 27% of sales.
As a result, Pfizer is very profitable. In addition to production costs, Pfizer spends a considerable amount of money on research and development expenses. These proportions reflect the nature of the pharmaceutical industry and pharmaceutical companies.
When my family meets, the general topic of conversation is Finance. My Mom says that the simplest way to explain a P&L is “income less expenses which shows whether a profit or loss has been made; or breakeven”. Now, let’s try explaining this in simpler terms to my 9-year-old brother at Thanksgiving dinner as he is always fascinated by new things.
The Profit and Loss Statement (P&L) includes 3 main sections: sales, cost of sales, and expenses. In Pfizer’s case, this would include the money they make in all 3 operating segments of Biopharma (e.g., vaccines, hospitals, internal medicine, etc), Pfizer CentreOne (e.g., manufacturing and formulations), and Consumer Healthcare (e.g., over-the-counter and prescription medication). Sales is nothing but the money earned from selling goods and services. The cost of sales is the money used to produce these goods and services. Expenses would include any other operating expenses for production.
Take the Pfizer and BioNTech Comirnaty vaccine, as an example. If the vaccine is sold at $20 per vaccine (sales) and it costs $2 to manufacture one vaccine (cost of sales) and operating costs (expenses) are $2 per vaccine, the net income is $20-$2-$2 = $16. Now, Pfizer shares these profits at a 50-50 split with BioNTech for this vaccine. Hence the net income/profit for Pfizer alone per dose of the Covid-19 vaccine is $8. Costs can be fixed (e.g., cost of rent for land) or variable (e.g., salaries of employees) which is also factored into a P&L when calculating net income.
We calculate ratios as 100% of the net sales for both Pfizer and BioNTech combined as it is uncertain how costs are split between both companies despite profits being split in a 50-50 ratio. Hence, the cost of sales as percentage of net sales is 10%. Expenses as a percentage of net sales is another 10%. Hence, net income/profit is 80% of net sales. However, considering the fact that profits are split in a 50-50 ratio, it is to be noted that this 80% is split between Pfizer and BioNTech.
Since this is per one dose of vaccine and hence marginal, total revenue for Pfizer would roughly be the company’s revenue/sales per vaccine multiplied by the number of units sold and total net income would be calculated accordingly. For perspective, if Pfizer sells 100,000 units at $20 each with net income at $8, total Pfizer’s net income/profit is 50% of ($16*100,000) which is $800,000.
Now imagine this happens not just with vaccines but also with other segments within the company. All this is added to the Profit and Loss Statement. My brother was intrigued, to say the least.
Neither of my parents have a professional financial background, so I will introduce my family to Apple’s 2021 profits in the simplest way possible. Total sales are very objective, the cost of sales is 58% of total sales, expenses account for 16%, net income 26%. This means that the production cost of Apple from raw materials to finished products is 58% of the total sales, while marketing, administrative, operating and other miscellaneous expenses account for 16%. Apple can make as much as 26% of its net profit in the process. As a tech giant, the profit of Apple is really high!
Neither of my parents work in finance industry, so I would have to explain the Profits and Losses of Apple in understandable terms.
Firstly, I will explain P&L is a financial statements that showcases the profit and loss of the company, basically covering three main segments: sales, cost of sales, and expenses. Then I will use detailed data to explain more clearly. Specifically, Coca-Cola 2021 sales is $38,726, increased by 17.25% compared to 2020. Meanwhile, the cost of sales was $15,508, accounting for 40% of sales, and related expenses were $13,554, accounting for 35%. Net income was $9771, representing 25% of sales.We can draw Coca-Cola is a very profitable company although suffer from the pandemic in 2020 and recover quickly in 2021.
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My parents own a textile company, and some of my family members works in financial companies, thus I think it will be easier to explain the Profits and Losses of Nike to them in our Thanksgiving Dinner. I will basically segment the P&L form into three parts: Sales, Cost of Sales, and Expenses, and I will firstly show them the equation that Net Income(%)= Sales- Cost of Sales- Expenses, then several specific data from Nike will be introduced to them as detailed explaination.
For Nike, I will introduce to my family that Nike’s Sales was $44538 in 2021, and increased by 19.08% compared to 2020. It’s Cost of Sales was $24576 in 2021, which was accounting for 55.18% of the total Sales, and increased by 16.13% from 2020. For the expenses, Nike’s expenses was $14325, which took up for 32.16% of Sales, and increased by 4.55% from 2020. In 2021 Nike’s Net Income was $5727, which was accounting for 12.66% of the total Sales. Thus, for Nike, their Net Income(12.66%)= Sales(100%)- Cost of Sales(55.18%)- Expenses(32.16%), and Nike could generate 12.66% of its total Sales for its net income in their operation. Therefore, as a global soprts retailer giant, Nike could be really profitable globally.
For Disney, the main offline theme park competitorsare Universal Studios and six flags. In 2021,Disney’s cost of sales reached $4,300millions Disney revenue for the quarter ending June 30, 2022 was $21.504B, a 26.33% increase year-over-year. Disney’s main competitor in the
online business is netflex. Disney’s online business accounts for a lot of its total, with Disney plus increasing its profit by 85% in 2021 compared with 2020.
Although my parents do not work in the field of finance, they are always interested in investing in stocks. Therefore, they have a basic understanding of financial knowledge. But they may not know much about a company like Disney, which is listed in the United States. I’ll give them a brief overview of Disney’s business and how it’s been doing in recent years. It’s not intuitive to tell them specific numbers like income, so I’ll tell them in terms of growth rates. At the same time, it will be easier for them to understand how Disney operates when compared with competing companies. Disney has been more resilient to the coronavirus than its rivals.
My father knows a lot about finance, so I’m not the least bit worried that he won’t be able to understand a company’s p&l. But my mother is not very interested in numbers, so if I were in a situation like this, I would try to keep the numbers to a minimum so that my mother could better understand what I was trying to say, or at least not bore her.
The company I would like to talk about is Estee Lauder because it would be more interesting to my mother. Estee Lauder’s revenue for January-June 2022 was 17,737 million, and if we classify revenue as 100%, Estee Lauder only takes up 24.3%, or 4,310 million, in spending on raw materials for its products, which is the cost of sales. But Estee Lauder’s net income is only 2,412 million or 13.6%. This is because Estee Lauder spends very much on non-raw materials, which called expenses, such as marketing expenses, which account for 57.9%, or 10270 million. This shows that Estee Lauder’s main cost is not in raw materials.
For Disney, the main offline theme park competitorsare Universal Studios and six flags. In 2021,Disney’s cost of sales reached $4,300millions Disney revenue for the quarter ending June 30, 2022 was $21.504B, a 26.33% increase year-over-year. Disney’s main competitor in the
online business is netflex. Disney’s online business accounts for a lot of its total, with Disney plus increasing its profit by 85% in 2021 compared with 2020.
Compare to our major competitors, McDonald’s has higher revenue and net income. (McDonald’s net income is 32.5%, Burger King is 21.8%, Wendy’s is 10.6%) Digital sales are doing great in 2021, 25% of sales in our top 6 markets came from digital channels, we should maintain our strength in the digital market. and we could try to do more special menu in USA, since in other country special menu works really well.
I’m from L’Oreal team. Both my parents and I did not learn about finance in a professional way before. As for me, my major is journalism during my undergraduate school. And I did not learn much about numbers even those graphs and charts. But with what I learned from this course, I think P&L can help the company leaders know the business much more clearly. I found that L’Oreal has made a large amount of profit in 2021 than 2020 because of the pandemic. I think learning about P&L really helped me a lot for understanding the balance sheet.
My parents owned their own business that sold gasoline. But their educational background is very low. So for them, commercial things are very familiar, but every economic term needs to be explained in the most everyday language.
For example, I am very interested in Disney. Then the Profit & Loss statement can be explained in this way.
Sales is like income. Tickets, hotels, and product sales, all the money the Disney companies make. Cost of sales and expenses is the money Disney spends. Things like salaries for employees, money to maintain the facility and build the facility. Simply put, one is the money you get and the other is the money you spend. And if we get more money than we spend, it means we have a profit, we are profitable.
My parents’ jobs are tied to business, so I can explain and talk to them about P&L in professional terms.
First of all, the company I chose is Apple, as we all know, Apple is a famous company that produces cell phones and other electronic products, and the cell phones my parents use are also produced by Apple, so it’s more convenient for me to introduce and explain to my parents, first of all, I will introduce to my parents what is P&L, P&L is a way to calculate the company’s profit and loss over a period of time, that is to say, P&L can calculate the profit of the company and the loss of the company. In other words, P&L can calculate the company’s economic situation for a period of time, and the full name of P&L is Profit loss.
I explained to my parents about Apple’s finances for the last two years and explained to them how to calculate and see the company’s financial income through the formula:
Sales-Cost-Expenses=Net Income
https://www.wsj.com/market-data/quotes/AAPL/financials/annual/income-statement
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LVMH’s annual report includes the percentage of annual growth of revenue. The revenue growth is shown in reported growth and organic growth. Organic growth almost always seems to look better in numbers than reported growth. Why are reported growth and organic growth different and what is causing this difference?
If I were to explain LVMH’s P&L to my family, I would first explain what brands are operated under the conglomerate. LVMH’s business is divided into 5 sectors: wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewelry, and selective retailing. LVMH’s income statement is a collective report of all business sectors. A P&L is a profit & loss statement, usually seen as the income statement of a company. The company’s profit is calculated by deducting expenses from total revenue. This is different than the balance sheet because a balance sheet adds up the company’s asset. If we want to learn about the profit and loss of LVMH from last year, we should be looking at the income statement.
The income statement calculates net profit by subtracting expenses from total revenue, including COGS, marketing and selling expenses, administrative expenses, operating expenses, income taxes, and etc. Looking at the income statement, LVMH spent more on marketing & selling than on cost of goods sold, which means that they have invested a lot in marketing and that marketing is crucial for the luxury industry.
In the given scenario, I will be will be speaking about the company I chose and their competitors in an informal chat with Family members during Thanksgiving.
“Hey everyone, while we’re talking about tech and cars, have you guys heard about Tesla? It’s really fascinating how they’re shaking up the car industry! They’re like the rock stars of electric vehicles. Unlike traditional companies, Tesla relies heavily on data and software to improve their cars, which means they don’t need as much expensive hardware.
Now, BYD and Li Auto are also in the game, especially in China, where they’re selling tons of electric vehicles. BYD is focusing on a wide range of options, from buses to cars, while Li Auto is really pushing its extended-range electric vehicles. They’re catching up, but Tesla’s got this cool combination of brand loyalty, a massive Supercharger network, and cutting-edge technology that keeps them ahead.”And since they’re developing full self-driving, maybe in the future, Mom won’t need to worry about parallel parking anymore! My uncle works at Goldman Sachs, so he might appreciate this—Tesla’s business model lets them scale up efficiently, which is why they’ve been able to report profits even as they invest heavily in new tech and factories.”
I would start by talking about the newest innovations meta is coming with like the Metaverse , they are also creating highly advanced algorithms that can predict consumer behavior to the highest degree . But these innovations are coming at a cost . the research and development cost of Meta has doubled in 2023 as compared to 2020 and im sure that the 2024 numbers will be even higher . They need their ventures to be a success as they are sinking a lot of extra money on these mega projects. As of 2023 Meta’s revenue numbers have shown a sales growth of 58% as compared to 2020.Showing that Meta is successfully appealing to new users and clients.The Net income has also increased significantly by 31% as compared to 2020 , the profitability has been impacted a lot by the rising Research and development costs of the company. i would also add that as expected the costs as a percentage of the revenue or sales have increased over the years as expected . In 2020 cost of sales being 11.4% and it being 19% approximately in 2023.
Understanding how to read the P&L will allow you to understand the numbers of your company and benchmark yourself against your peers. Numbers are just numbers unless you have something to compare them to. Breaking down the P&L allows you to stay in business and competitive. You should look for 4 numbers on the P&L—let’s take Nike’s P&L from 2024, for example. We want to look at their 1) sales, 2) costs, 3)expenses, and 4) net income.
For 2024, Nike’s sales were 51,386M, costs to make the goods are 28,769M, expenses like rent, utilities, and labor were 16,574M and net income was 5,700M. Let’s look at these as a precentage (%) of sales. And then see how they stack up against their competitor Adidas.
NIKE P&L analysis 2024:
Sales = 100%
Costs of Sales = 56% (so, for a $100 item, it costs them $56 to make it) (28,769/51,386=.56)
Expenses = 33% (cost of sales 56% – net income 11%)
Net Income = 11% (after all is said and done their income is 11% for each sale) (5,700/51,386)
Adidas P&L analysis 2023:
Sales = 100%
Costs = 58%
Expenses=43%
Net Income= -1%
Looking at these comparisons, Nike is definitely in a better position financially as a company right now. The Adidas drop in income over the past couple of years is largely due to PR fallout from the Yeezy collaboration.
Reading a P&L statement can be daunting with all of the line items and tricky to figure out. It is a summary of the sales, costs, and expenses during a time period of a company. If you take your sales and subtract your costs and expenses, this will give you your net income. The percent of sales ratio can be a helpful viewpoint to visualize and to check your numbers. Overall sales will always be 100%, with costs and expenses being smaller portions to determine the net income percentage. It’s also a good way to gauge where you can adjust to increase net income. It can help answer questions like, are we paying too much in the cost of goods sold? Can we get products from elsewhere cheaper? Or possibly are we paying too much in overhead, are employees being overpaid?
Nike’s 2024 Profit & Loss sheet (P&L) shows the sales, cost of sales and expenses of Nike, which helps determines their Net Income (their profit). In 2024, their sales were $51,386 (in millions), cost of sales were $28,769 (in millions), and expenses were $16,574 (in millions). This leaves their Net Income to be $5,700 (in millions). Based on their total sales, 55.99% is the cost of sales, 32.25% are the expenses, and 11.09% is their Net Income.
I grew up in Washington, DC, as did both of my parents, so several of my family members – particularly those attending Thanksgiving Dinner – are familiar with the ins and outs of the city. If I were to explain the P&L of LVMH to them, then I would leverage a DC-specific analogy to help them better understand the 3 main segments. I would first ask them to imagine that LVMH was managing the city’s operations, tourism, and reputation in general. I would equate LVMH’s sales (which was €84.7 billion in 2024) to DC’s total visitor spending – from high-end hotel stays, to expensive restaurant bills, to luxury shopping. I would then draw the parallel between LVMH’s costs of sales (which was €27.9 billion in 2024) and the costs to keep DC “up and running” – which includes maintaining its numerous museums, keeping the city clean, as well as ensuring that public transportation is cleanly and functional (to name a few). I would explain LVMH’s expenses as those required to make DC stand out as a desirable city to visit and encompasses those working behind the scenes to do so – this includes marketing, admin, etc. Finally, I would equate LVMH’s net income (which was €12.6 billion in 2024) to the city’s surplus – or money left to reinvest in new museums, restaurants, shops, etc., better infrastructure, and expanding its influence on both a national and global scale.
Team: Pepsi
PepsiCo’s recent financial performance provides a clear example of how a company can maintain profitability even in a challenging market environment. According to the 2024 Form 10-K, the company reported revenue of approximately $91.9 billion, essentially flat compared to the prior year but up from 2022. Despite this plateau in sales growth, operating profit increased by about 7.5 percent, and net income rose 6 percent to $9.6 billion. Cost of sales remained steady at roughly 45 percent of revenue, while SG&A expenses were close to 40 percent, underscoring consistent cost management.
The Wall Street Journal adds a useful perspective on quarterly results and forward-looking challenges. For the fourth quarter of 2024, net income improved to $1.52 billion even though revenue declined slightly to $27.8 billion. In the second quarter of 2025, PepsiCo reported revenue growth of 1 percent, reaching $22.7 billion, and delivered earnings per share of $2.12, ahead of expectations. However, this performance was tempered by volume declines in both beverages and snacks, as well as a $1.86 billion impairment related to the Rockstar and Be & Cheery brands.
Overall, the data highlights PepsiCo’s ability to protect margins and deliver earnings through pricing and productivity initiatives, but it also illustrates the headwinds of softer volume growth and brand-specific write-downs. Evaluating both the audited annual results and the WSJ’s quarterly reporting shows the importance of looking beyond top-line revenue and considering the full picture of expenses, profitability, and strategic risks.
Resources:
https://investors.pepsico.com/docs/default-source/investors/q4-2024/q4-2024-form-10k_kgcva0jf89d2927o.pdf?utm_source=chatgpt.com
https://www.wsj.com/market-data/quotes/PEP/financials/annual/income-statement?gaa_at=eafs&gaa_n=ASWzDAioflOvFg1Hql1GbVsXZjaKK50dJecFK5wNkNBpbS_i4aUNwdvW5G_m3yZPSg8%3D&gaa_ts=68cb3a62&gaa_sig=JnBwQ7M6S1puAqoE2f_7xmrCeonfXsDRTwb-dpyhTprE8hXmm1iqRgwX_i2PYLPNLcKliOfnTJFqle0CBqdSAg%3D%3D
Team: Pepsi
PepsiCo’s recent financial performance provides a clear example of how a company can maintain profitability even in a challenging market environment. According to the 2024 Form 10-K, the company reported revenue of approximately $91.9 billion, essentially flat compared to the prior year but up from 2022. Despite this plateau in sales growth, operating profit increased by about 7.5 percent, and net income rose 6 percent to $9.6 billion. Cost of sales remained steady at roughly 45 percent of revenue, while SG&A expenses were close to 40 percent, underscoring consistent cost management.
The Wall Street Journal adds useful perspective on quarterly results and forward-looking challenges. For the fourth quarter of 2024, net income improved to $1.52 billion even though revenue declined slightly to $27.8 billion. In the second quarter of 2025, PepsiCo reported revenue growth of 1 percent, reaching $22.7 billion, and delivered earnings per share of $2.12, ahead of expectations. However, this performance was tempered by volume declines in both beverages and snacks, as well as a $1.86 billion impairment related to the Rockstar and Be & Cheery brands.
Overall, the data highlights PepsiCo’s ability to protect margins and deliver earnings through pricing and productivity initiatives, but it also illustrates the headwinds of softer volume growth and brand-specific write-downs. Evaluating both the audited annual results and the WSJ’s quarterly reporting shows the importance of looking beyond top-line revenue and considering the full picture of expenses, profitability, and strategic risks.
Resources:
https://www.wsj.com/market-data/quotes/PEP/financials/annual/income-statement?gaa_at=eafs&gaa_n=ASWzDAioflOvFg1Hql1GbVsXZjaKK50dJecFK5wNkNBpbS_i4aUNwdvW5G_m3yZPSg8%3D&gaa_ts=68cb3a62&gaa_sig=JnBwQ7M6S1puAqoE2f_7xmrCeonfXsDRTwb-dpyhTprE8hXmm1iqRgwX_i2PYLPNLcKliOfnTJFqle0CBqdSAg%3D%3D
https://investors.pepsico.com/docs/default-source/investors/q4-2024/q4-2024-form-10k_kgcva0jf89d2927o.pdf?utm_source=chatgpt.com
Team: Pepsi
PepsiCo’s recent financial performance provides a clear example of how a company can maintain profitability even in a challenging market environment. According to the 2024 Form 10-K, the company reported revenue of approximately $91.9 billion, essentially flat compared to the prior year but up from 2022. Despite this plateau in sales growth, operating profit increased by about 7.5 percent, and net income rose 6 percent to $9.6 billion. Cost of sales remained steady at roughly 45 percent of revenue, while SG&A expenses were close to 40 percent, underscoring consistent cost management.
The Wall Street Journal adds useful perspective on quarterly results and forward-looking challenges. For the fourth quarter of 2024, net income improved to $1.52 billion even though revenue declined slightly to $27.8 billion. In the second quarter of 2025, PepsiCo reported revenue growth of 1 percent, reaching $22.7 billion, and delivered earnings per share of $2.12, ahead of expectations. However, this performance was tempered by volume declines in both beverages and snacks, as well as a $1.86 billion impairment related to the Rockstar and Be & Cheery brands.
Overall, the data highlights PepsiCo’s ability to protect margins and deliver earnings through pricing and productivity initiatives, but it also illustrates the headwinds of softer volume growth and brand-specific write-downs. Evaluating both the audited annual results and the WSJ’s quarterly reporting shows the importance of looking beyond top-line revenue and considering the full picture of expenses, profitability, and strategic risks.
Team: LuluLemon
Lululemon reported net revenue of $10.6 billion for fiscal year 2024, reflecting a 10% year-over-year increase from $9.6 billion in 2023. This growth was primarily driven by a 34% rise in international revenue, while revenue in the Americas grew only about 4%, according to the USSEC. The company’s gross margin improved to 59.2% in 2024 from 58.3% in 2023, supported by better inventory management and product mix optimization, including the exit from the Mirror product line, again according to the USSEC. Selling, general, and administrative expenses were consistent at around 37.6% of revenue in 2024 compared to 37.5% in 2023, enabling operating income to increase to 21% of revenue from 19% the previous year (USSEC). Net income grew from $1.41 billion in 2023 to $1.55 billion in 2024, resulting in a net margin improvement from approximately 14.6% to 15.3%, according to LuluLemon’s corporate website. Lululemon’s international revenue growth was driven by strategic store openings and expanding brand presence, particularly in China, where the company opened 13 new stores in 2024, contributing to a 46% increase in revenue from Mainland China. Expansion efforts also focused on Europe and Asia, where rising demand for premium athleisure helped fuel comparable sales increases of 20% in international markets, according to S&P Global. In contrast, LuluLemon’s biggest competitor, Alo Yoga, a privately held company, reported over $1 billion in sales in 2022, marking a 32% increase from the previous year, according to Forbes. However, detailed financial metrics such as gross margin and net income for Alo Yoga are not publicly disclosed. Overall, Lululemon’s publicly available financial data demonstrates higher profitability and operational scale than Alo Yoga.
PepsiCo produced net revenue of $91.9 billion during the 2024 fiscal year, a slight increase from 2023’s $91.5 billion, according to the annual report. The growth came amidst resilience from international markets, helping balance out some soft trends from the United States and Mexico. Company gross margin advanced from a slight decline from a year ago’s 54.4% to 54.6% by means of disciplined pricing, favorable product mix, as well as cost discipline. Selling, general, and administrative expenditures remained high at 40.5% of revenue, consistent with the company’s mass-market distributor base and extensive marketing initiatives. As a result, operating profit advanced to 14.0% of revenue from around 13.1% a year ago. Net income rose to $9.6 billion for the year through 2024, generating a margin of 10.5%, from a year ago’s 10.0%. The earnings of PepsiCo demonstrate the company’s ability for balancing rising commodity and logistics costs against pricing power, as well as gains from efficiencies. Significantly, the company takes maximum advantage of global scale, with strong performances from international markets. PepsiCo also has a diversified portfolio of brands between snack foods as well as drinks, providing a risk-blurring factor from category-specific softness. Against peers such as Coca-Cola, the diversified mix of snacks as well as drinks for PepsiCo offers stability, but comes at the cost of rising operating costs compared with pure-play drinks peers. As a whole, the 2024 results for PepsiCo demonstrate steady top-line growth, solid margins, as well as consistent profitability at scale.
Lululemon’s sales revenue increased from $9.62 billion in fiscal year 2024 to $10.59 billion in fiscal year 2025, reflecting solid growth, albeit at a decelerated pace — sales growth slowed from 18.6% to 10.1%. In contrast, competitor Athleta reported $1.4 billion in net sales for FY2024, representing a slight 1% decline compared to the prior year. Cost of sales rose from $4.01 billion in FY2024 to $4.32 billion in FY2025, maintaining a relatively stable cost-of-sales ratio, improving marginally from 41.7% to 40.8%. Expenses, calculated as sales revenue minus net income, grew modestly from $8.07 billion to $8.77 billion. Net income increased from $1.55 billion to $1.82 billion, resulting in a net profit margin improvement from 16.1% to 17.2%. However, net income growth decelerated sharply, dropping from 82.4% to 17.1% and continuing to decline below 10% by August 2025. According to Lululemon’s CEO, the primary factors contributing to this slowdown in both sales and net income growth are a “stale” loungewear product line and intensified competition within the premium activewear sector. Emerging challengers such as Alo Yoga and Vuori are gaining traction by appealing to similar customer demographics with fresh design offerings. Without innovation in apparel design and product differentiation, Lululemon risks market share erosion in the near term.
Team: CVS
Since 2024, CVS’ total revenue has grown 8.4% from $91.2 billion to $98.9 billion as of Q2 in 2025 due to an increase in sales and more prescriptions being filled. Their recent partnership with Aetna played a part in revenue growth by bringing in $36.3 billion, showcasing a massive YoY of ~40% resulting from effective operations and customers shopping. Although drug prices in 2024 increased 10% from $31.1 billion to $33.8 billion in 2025, their profit also experienced a decline in the health service area while the pharmacy and consumer wellness division saw a 8% increase from 2024 to 2025 of $33.6 billon. In terms of expenses and net income, Legal costs and increased medical claims caused CVS’ operating net profit to drop 22% in 2025, bringing profit down from $664 million to $2.38 billion. Adjusted operating income in 2025 was 1.7% higher at $3.8 billion since there was an increase in profit from insurance and pharmacy although they ended up being offset by the loses that health services experienced. With the large amount of legal charges CVS faced, their EPS dropped down a huge amount of 43% from $1.41 to $0.80 while adjusted EPS stayed at $1.81 flat. Overall, CVS has done quite well balancing their growth with legal risks and managing costs added to the mix, all while continuing to invest long-term in transforming their healthcare. Compared to their competitors, they have a tighter profit margin despite their strong revenue growth. Even with their 8.4% revenue growth in Q2, UnitedHealth and Walmart continue to have larger revenue. and different business focuses. So although CVS leads in healthcare services with their financial stability and revenue growth, they still face tighter profit margins with more challenges related to costs compared to competitors with higher margins or different models.
https://www.cvshealth.com/content/dam/enterprise/cvs-enterprise/pdfs/2025/Q2-2025-Earnings-Release.pdf
https://healthworksai.com/wp-content/uploads/2025/08/CVS-Health-Q2-Results-1.pdf
https://www.alpha-sense.com/earnings/cvs/
https://monexa.ai/blog/cvs-health-q2-beat-guidance-raise-and-aetna-stabil-CVS-2025-09-08
https://csimarket.com/stocks/competitionSEG2.php?code=CVS
https://www.gurufocus.com/stock/CVS/analysis
https://csimarket.com/stocks/compet_glance.php?code=CVS
https://www.marketbeat.com/stocks/NYSE/CVS/competitors-and-alternatives/
PepsiCo’s revenue has increased year-over-year from 70 billion to 92 billion in the last five years. Even though sales are up by 22 billion, they’re having difficulty keeping up their growth YoY and are seeing a steady decrease in sales growth over the past 3 years, especially in 2024 where they only grew 0.4%.
2021 saw the biggest net sales growth at 12.9% within the last 5 years. This was due to strong topline performance across their beverage and snacks/food verticals in the US and abroad. This increase in sales was due to product innovation across salty, savory and beverage categories in 2021.4
After 2021, PepsiCo’s growth rate dipped by 32.7% the following year and began reporting single-digit growth for the past 3 years. This can be attributed to a couple of factors. First, the company benefited from the consumers snacking on food during and after the pandemic. Several of their products Doritos, Lays, Mountain Dew skew towards in-home consumption, however people are spending more days at the office and have returned to their pre-pandemic routines per the WSJ.5 Second, inflation and less purchasing power YoY. Third, customers are opting for healthier drinks and snacks alternatives.
Fourth, the company has also been focusing on expanding their food unit while they lose market share in the Cola category. In fact, Pepsi has slipped to #3 behind Dr. Pepper and Coke for America’s favorite Cola brand6 and during 2024, the company also suffered a 3 month boycott in Europe last year when Carrefour stopped selling PepsiCo’s food and beverages due to price increases.7
As the company grew so have their cost of sales and expenses. However, when looking at the past 5 years, these 2 metrics closely resemble each other, both ratios accounting for 45% in cost of sales and 44% in expenses, signaling that the company is focused on being as cost-efficient as possible, reducing day-to-day expenses and operating costs to improve overall profitability without increasing much in sales as mentioned before.
Finally, the net income margin improved slightly this year and is at 10.4% which is 4.8% higher than in 2023, allowing PepsiCo to earn roughly $0.10 cents for each dollar spent.
Moving forward, PepsiCo could focus their efforts on re-gaining market share with their beverage business and it is doing so, by expanding its partnership with Celsius, an energy drink gaining market share from Red Bull and Monster8.
Additionally, if PepsiCo decided to follow in Coke’s footsteps and sell their bottling and distributing operations, it could invest more heavily into marketing, advertising and brand building to bring consumers back. However this would be more of a long term play since earnings could suffer in the short term. 9
Looking ahead, PepsiCo’s confirmed that tariffs will lead to earnings decline in 2025 given that the Cola concentrate for almost all of the US market is made in Ireland and is now subject to a 10% tariff as per the WSJ.10
Overall, consumer innovation could be the growth driver for capturing new costumers and increasing sales. Another option could be promoting established best-sellers and high margin products while de-prioritizing low performing ones as well as monitoring extra expenses coming from tariffs.
In terms of competitors, both saw healthier growth between 1.18% and 2% a larger net income margins at 12.65% and 22.73% in 2024 for Mondelez and Coca Cola respectively.2-3
Nonetheless, they’re also being affected by current events. For example, Coca-Cola’s sales volume fell in America partly due a decrease in spending from Hispanics, a strong segment for the brand. The incline in traffic is due to fear of raids and a misinformation campaign that claimed the company was helping to remove illegal workers. This led to a boycott within the community.11
As for the snacks business, customers have cut back on snacking due to inflation and less purchasing power.12 Tariffs are also hitting the industry due to commodities found abroad that are used in these products13, a move that can also affect Mondelez International Inc, one of their top snacks competitors.
Team LVMH,
According to the Wall Street Journal and LVMH’s 2024 P&L, the group reported revenue of $92.3 billion, down about 2% from 2023’s $93.9 billion. Gross margin slipped slightly, easing from roughly 69% in 2023 to around 67% in 2024. The most significant decline came in profitability: operating profit fell from about 27% to 23% of sales, while net profit declined 17%, dropping from $16.5 billion in 2023 to $13.7 billion in 2024.
Looking more closely at the P&L, the decrease in both operating and net income can be largely attributed to weaker performances in certain divisions, especially Wines & Spirits, which makes up around 10% of the total revenue. This category struggled amid lower demand and higher input costs. Externally, the luxury industry as a whole has been pressured by rising production costs, from raw materials to labor and logistics, forcing brands to raise prices. Another factor may be the transitional period in major fashion houses, where several of LVMH’s flagship brands are changing creative directors. This often creates uncertainty among recurring buyers, who may delay purchases until new creative visions debut on the runway.
One notable bright spot in the P&L is the growth in perfumes and cosmetics, which represents almost 14% of the total revenue of 2024. This segment could provide a meaningful growth opportunity for LVMH in upcoming quarters, given its broader accessibility and consistent demand.
Overall, while rising costs and shifting brand dynamics weighed on performance, LVMH has managed to sustain strong margins that protect net income, something peers like Kering and Richemont have struggled to match as successfully.
Based on the information from WSJ, Lululemon’s P&L shows strong growth and efficiency improvement over the past three years. Net sales rose from $8,111 million in 2023 to $9,619 million in 2024 and $10,588 million in 2025. However, growth slowed each year, from 29.63% in 2023 to 18.6% in 2024 and down to 10.7% in 2025. Which means that even with slower sales, earnings became stronger.
When it comes to the cost of products sold as a percentage of revenue, it decreased from 44.7% in 2023 to 41% in 2025. I would assume that Lululemon managed its sourcing, supply chain, or pricing more effectively, which then ultimately led to better gross margins. Expenses also decreased as a share of revenue, from 44.8% in 2023 to 42% in 2025, which indicates better control over operating costs. Together, these changes allowed net income to grow from $855 million in 2023 to $1,815 million in 2025, with margins going from 10.5% to 17%.
Perhaps some of these shifts can be attributed to the recent restructuring we discussed in the headcount assignment. As I mentioned in my previous blog comment, in mid-2024 and early 2025, Lululemon eliminated roles at a Washington distribution center and cut about 150 corporate positions in North America. Besides, according to Business of Fashion and Retail Drive websites, these moves were driven by sluggish sales in the U.S., which makes up ~75% of Lululemon’s revenue, alongside with slowing international growth, rising tariffs, and inventory levels that outpace demand. I believe that it is also worth mentioning that the increasing competition from brands like Alo and Vuori, as well as concerns that Lululemon’s efforts to expand its product lines may result in
weakening its appeal to core customers. These pressures ultimately pushed management to streamline operations, reduce costs, and refocus resources on agility and efficiency.
Interestingly, in comparison to its competitors like Nike and Under Armour, Lululemon appears to be in a stronger position. For instance, Nike generated significantly bigger revenue in 2025 ($46,402 million), but its sales declined by 9.7%. Its net income margin was only 7%, far below Lululemon’s 17%. Under Armour struggled even more, with revenue of $5,166 million declining by 9.3% and a net loss of $201 million, which resulted in a negative margin of -4%.
These comparisons highlight Lululemon’s relative strength in profitability. Despite slow sales growth, Lululemon still earns significantly higher profits, unlike Nike and Under Armour.
Neither of my parents has any financial background, so when explaining Costco’s income statement at the dinner table, I’d describe it like this: imagine selling $100 worth of goods. About $88–89 goes toward covering procurement and logistics costs, leaving only $11–12 as the actual gross profit. Approximately $10 of the revenue is then used to cover operating costs, rent, and employee salaries. Costco has a far lower expense ratio than traditional retail because it runs warehouse-style stores. In the end, there is only about $2 in net profit, which translates to a net profit margin of roughly 2%. Costco’s enormous sales volume implies that even though this margin might appear little, it adds up to billions of dollars in profit. Put another, high-margin products do not generate revenue for Costco. Rather, it survives on a large membership base, excellent operational efficiency, and minimal gross margins. This business model gives it a distinct edge in the retail industry by luring customers with affordable, superior products and providing investors with steady, sizable long-term returns.
I am presenting these findings to my dad, who is a businessman.
Based on the information from WSJ, looking at LVMH’s 2024 P&L through a ratio lens, sales came in at $99.1bn (€84.7bn), down slightly from $100.8bn (€86.2bn) in 2023. That’s a 1.7% sales decline, which stands out because LVMH has consistently grown in the past few years. This stemmed from FX headwinds( explicitly mentioned in LVMH’s 2024 press release, where they state that currency effects negatively impacted reported revenue and profit) and weaker demand in Wines & Spirits, a division that typically accounts for nearly 10% of sales and boasts the highest margins (so when this division slows, it disproportionately drags margins), according to the official LVMH key figures page. The cost of sales, on the other hand, tended to rise faster than revenue. It reached $32.7bn (€27.9bn)/ 33.0% of sales, compared to 31.2% in 2023. This pushed the gross profit down to 67.0% from 68.8%. A big factor was the lower mix from Cognac and Champagne, which usually lifts margins.
On the expense side, SG&A hit $43.5bn (€37.2bn)/ 43.9% of sales vs. 42.3% in the year before. LVMH kept pouring money into new stores and big marketing pushes, a bold move in a year when sales barely grew, so it ended up squeezing profits, with an EBIT margin sliding from 26.5% to 23.1%. Consequently, the net income dropped to $14.7bn (€12.6bn) from $17.8bn (€15.2bn), a 17% decline.
Even with a tough year, I believe LVMH still held up better than its rivals. Kering leaned too heavily on Gucci so when demand slowed, its profits took a bigger hit. Richemont’s focus on watches and jewelry made it just as vulnerable when customers pulled back on luxury items. LVMH, on the other hand, had balance on its side while Fashion & Leather was slow, strong growth at Sephora and in Perfumes & Cosmetics kept the group steady.
Overall, the ratios show how a small 1.7% sales decrease resulted in a 17% net income decline, but also how LVMH’s broad portfolio managed this impact better than its competitors.
Taking a closer look at the 2024 luxury industry financials, there’s a clear divide opening up between LVMH and Kering—not just in overall scale, but in how robust their business models really are. LVMH’s Fashion and Leather Goods division is now the powerhouse, bringing in nearly half the group’s revenue and more than 70% of operating profit. This is the result of a smartly balanced brand portfolio and sharp operational execution. With their global reach, LVMH has built an economic moat, making their market position and financial footing even tougher to challenge.
Kering, on the other hand, is dealing with real structural headaches. In 2024, revenue tumbled 23%, net profit fell by more than 60%, and operating margins took a major hit. There’s a fundamental question here about whether Kering’s cost structure and pricing have any real staying power. Even with some buzz around Gucci’s creative refresh under Demna, investors haven’t seen that translate into sustainable numbers. Kering’s gross margin—just 28%—is less than half LVMH’s 66.8%. That’s a telling gap, pointing to weak pricing power and clear inefficiencies across their production and retail operations.
From a financial perspective, LVMH is in a league of its own. With strong liquidity and earnings, they could afford to acquire a company the size of Kering without putting their own balance sheet at risk. At a market value of roughly €33.8 billion, Kering is theoretically within reach—especially if its recovery stalls or its valuation remains depressed. LVMH has a proven track record of integrating acquisitions, extracting cross-brand efficiencies, and leveraging shared infrastructure to create value right out of the gate.
The potential acquisition of Kering should not be understood merely as an expansion in brand volume. It would represent a deliberate repositioning of the global luxury landscape. LVMH would strengthen its position across key fashion categories, broaden its reach to new customer segments loyal to brands like Gucci, Balenciaga, and Bottega Veneta, and have the chance to structurally overhaul Kering’s operations. By bringing select Kering businesses into LVMH’s vertically integrated, higher-margin model, the group could drive substantial EBITDA growth and improve margin profiles across the board.
The timing of all acquisition are indeed critical too. Pursuing a deal during a temporary creative upswing would be a potential mistake because the opportunity lies in striking when external buzz hasn’t yet translated into real financial stability. That misalignment between perception and performance is where value can be found, allowing LVMH to act decisively.
I believe the divergence between LVMH and Kering isn’t just cyclical, it’s rooted in deeper structural differences such as business model and adaptability. LVMH stands out as the only player with the resources and expertise to acquire, restructure, and unlock long-term value from a peer like Kering. The rationale for such a move is not simply to gain market share, but to shape the long-term structure of the global luxury ecosystem.