LVMH Eases Fears of China Luxury Slowdown on Fashion, Leather

Date: Thursday, January 31, 2019
Source: Sourcing Journal

LVMH eased fears that an economic slowdown in China would hit sales of luxury items, reporting accelerating demand for the French conglomerate’s fashion and leather goods.

Fourth-quarter comparable sales rose 9 percent, the maker of Louis Vuitton bags said Tuesday in a statement after Paris markets closed. Analysts had predicted 8.7 percent growth. The company also plans to raise its annual dividend by 20 percent as it said the new year has gotten off to a good start.

LVMH reported continued growth in all regions, citing particular strength for wine and spirits in China, where consumers have been snapping up its Hennessy cognac and Dom Perignon Champagne. Along with a buoyant update from Swiss watchmaker Richemont earlier this month, the French conglomerate’s strong sales dampen concerns about the state of demand in the world’s largest luxury market.

Chinese demand for high-end leather goods and pricey drinks, which has been fueling the industry’s growth, contrasts with a slowdown in sales of some other products, with Apple Inc. reporting more subdued sales of iPhones as the country’s economy comes off the boil and a trade war with the U.S. bites.

“Can this extremely supportive climate continue indefinitely? Surely not,” LVMH Chief Executive Officer Bernard Arnault said at a news conference. But, he continued, “while I won’t give any numbers, the year so far is going in a very good direction.”

Fashion, leather

Sales in the fashion and leather-goods division—considered a bellwether for luxury rivals such as Gucci owner Kering SA, Prada SpA and Salvatore Ferragamo SpA—led the way for the French giant, rising 17 percent.

Shares of LVMH rose 0.4 percent to 259.75 euros during the Paris trading session, before the report. They rose 5.2 percent last year, compared with a decline of 13 percent for the S&P Global Luxury Index.

Luxury stocks traded in the U.S. gained after LVMH’s earnings report. Ralph Lauren Corp. rose as much as 1.2 percent, Tapestry Inc. jumped as much as 1.5 percent, while Tiffany & Co. pared earlier losses.

 

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