LVMH fashion and leather second-quarter sales beat forecasts

LVMH luxury group Chief Executive Bernard Arnault take pictures as his son Frederic marches during the traditional Bastille Day military parade on the Place de la Concorde in Paris, France, July 14, 2015.  REUTERS/Charles Platiau

LVMH’s (LVMH.PA) fashion and leather division, its biggest in terms of profit and sales, beat forecasts on Tuesday with a 10 percent rise in second-quarter sales driven by strong trading in Europe, Japan and the United States.

The performance, outpacing market estimates of 5-6 percent, came a day after Kering’s (PRTP.PA) Gucci posted its strongest sales growth in nearly two years.

LVMH, the world’s No.1 luxury goods group, said profitability at its flagship Louis Vuitton fashion brand remained at “an exceptional level”, while demand for its smaller Dior, Fendi and Celine brands were solid.

It did not provide detailed figures.

The Paris-based owner of Sephora beauty shops and jeweler Bulgari said total sales rose 6 percent on a like-for-like basis to 16.7 billion euros ($18.47 billion) in the first half, above the Thomson Reuters I/B/E/S average estimate of 16.35 billion.

“This seems to indicate that self-help actions are getting more traction than we envisaged for the current financial year,” Exane BNP Paribas analyst Luca Solca said.

Like Kering, LVMH said Chinese tourists were shopping much less in mainland China, Hong Kong and Macau, and were going to Japan and Western Europe instead.

“There is a shift of business to other geographies,” Finance Director Jean-Jacques Guiony said about Chinese customers, the world’s top buyers of luxury goods.

Like rivals Burberry (BRBY.L) and Kering, LVMH said it was in talks with mall owners in Hong Kong to renegotiate prices amid falling sales.

LVMH said Louis Vuitton, which contributes more than half of group profit, had strong growth thanks to new designs, but the brand was also helped by price increases, which reached around 5 percent on handbags in Europe.

The group said its Donna Karan and Marc Jacobs brands were being restructured under new management teams and that Marc Jacobs was suffering from wholesalers’ “wait-and-see attitude”.

“We are in the eye of the hurricane,” Guiony said about Marc Jacobs, explaining that the brand was undergoing profound changes, from prices to product lines and presentation. The company led by ex-Louis Vuitton designer Marc Jacobs is aiming to float on the New York stock exchange in the next few years.

LVMH said its flagship Hennessy cognac brand had returned to organic growth in the second quarter as strong business in the United States helped make up for continued weakness in China.

The group said it was monitoring “with great attention” the development of the so-called gray market of unofficial online distributors of luxury goods but predicted it would continue to exist while significant regional price differences remained.


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