LVMH enjoys surprise rebound in luxury sales
The upbeat report from the world’s largest luxury company offers a glimmer of hope for others in the sector, including Hermes, says analyst
Paris — LVMH, the owner of Louis Vuitton, enjoyed an unexpected rebound in consumers’ appetite for dresses and bags, buoying third-quarter sales.
Organic revenue at LVMH’s fashion and leather goods unit jumped 12% in the third quarter as the world’s largest luxury company cited strong sales of items such as Christian Dior’s $3,000 Bobby bags. Analysts expected a 0.9% decline.
Some consumers are eager to splurge despite a dire economic backdrop. LVMH’s performance shows how its leading brands are helping it weather the pandemic’s destructive economic consequences. Lockdowns and travel quarantines have sent the luxury industry into a deep slump because it relies on physical stores for the bulk of its sales.
Total revenue fell 7% on an organic basis, reaching €11.96bn. Analysts expected a 12% drop.
LVMH’s American depositary receipts gained 3.1%, recovering from earlier declines.
The upbeat report by LVMH, the first of the major European luxury players to report quarterly results, bodes well for others in the sector, said Luca Solca, an analyst at Sanford C Bernstein.
“We expect more players to follow this path — most notably Hermes,” he said in a note.
LVMH stunned investors when it announced in September that it planned to pull out of a $16bn deal to buy Tiffany. Earlier on Thursday, the US jeweller unveiled positive sales trends in an effort to keep the deal on track.
LVMH’s divisions had sharply mixed results in the latest period, with the wines and spirits unit — which houses Hennessy cognac and Moet & Chandon Champagne — also resisting better than expected. Organic revenue fell 3%, less than half the decline analysts were expecting.
However, some businesses fared worse. LVMH’s selective retailing unit, which includes DFS duty-free outlets and Sephora cosmetics store networks, saw organic revenue slump 29% amid a halt in international tourism.
The company, known for cautious projections, said it remains concerned about the economic outlook as the coronavirus spreads again in key markets including Europe. Still, it said it will maintain marketing spending and other measures aimed at boosting the value of its brands.
The resilient performance was driven largely by smart marketing at key brands such as Louis Vuitton and Dior, said Guillaume Gauville, an analyst at Credit Suisse.
“Investors should be careful in extrapolating this beat into other fashion brands,” he said in a note.
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