France-based LVMH Moët Hennessy Louis Vuitton, or LVMH’s (FR:MC) second-biggest brand, Christian Dior (FR:CDI), is under scrutiny for issues relating to its supply chain disclosures. According to Reuters, Dior was not in compliance with the UK legal requirements for disclosing working conditions in its supply chain until last month. Moreover, Dior had outdated information on its website regarding a third-party sustainability certification that it had ended more than a year ago.
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LVMH shares lost 0.74% as of writing, while Christian Dior was down 0.43%.
LVMH is a European conglomerate known for its popular luxury brands like Christian Dior, Louis Vuitton, Sephora, Fendi, and Bulgari.
Dior Struggles with Supply Chain Disclosures
The UK’s Modern Slavery Act 2015 mandates that companies with a turnover of £36 million or more in the country must adopt transparency in their supply chain operations. Companies are expected to publish an annual statement that includes measures they are implementing to ensure that there is no forced labor in their global operations.
However, Dior’s UK website displayed an expired anti-slavery statement from 2020 and an invalid sustainability certification until July 19.
The Backdrop
In June, Dior SRL, fully owned by Christian Dior Italia SR, was placed under judicial administration in Italy amid an investigation into workers’ exploitation at its Italian suppliers. Later, Italy’s competition authority announced that it was investigating Dior for misleading its customers and failing to be socially responsible. In response, Dior stated that it has extended its cooperation with Italian authorities and has ceased working with the guilty suppliers.
Reuters reported that the investigation prompted certain LVMH investors, including French asset manager Amundi (FR:AMUN), to demand more aggressive steps to monitor the suppliers’ treatment of workers.
Amid all the ruckus, Dior has provided a 2023 modern slavery statement that confirms its compliance with the UK rules. The new document also includes approval from the board of its subsidiary, Christian Dior UK.
Is LVMH Stock a Good Buy?
Over the past 12 months, MC stock has declined by 24.1%, highlighting a challenging period for the global luxury industry. Last month, LVMH reported disappointing results for the first half of 2024. The company’s net profit declined by 14% year-over-year to €7.3 billion.
Overall, MC stock has received a Moderate Buy rating on TipRanks, backed by nine Buy and five Hold ratings. The LVMH share price target is €833.46, which is 34% higher than the current trading level.
