LVMH Q1 Sales Jump 25% as Demand Increases in USA, Asia

Candy Sweet ad campaign at Louis Vuitton, LVMH's flagship brand

Paris—Even with slower growth in its fashion and leathergoods division, LVMH reported today that its first quarter sales jumped 25% to 6.58 billion euros (about $8.64 billion).

Revenue growth at the world’s biggest luxurygoods conglomerate, which came in at 14% on an organic basis (excluding currency effect, acquisitions and asset sales), was helped by its acquisition last year of Bulgari. Sales in LVMH’s watches and jewelry division soared up 141% to 630 million euros from a year earlier.

As expected LVMH said its fiscal year was off to an “excellent momentum” with particularly fast growth in Asia and in the United States and “good progress in Europe despite the contrasting environment.”

LVMH’s first quarter sales increase was ahead of the 6.43 billion euros that analysts’ average estimate expected.

By division, the fashion and leather goods division, which accounts for about 37% of its annual sales volume, had organic revenue growth of 12%, slowing slightly from the 18% increase it posted in fourth quarter 2011.

Louis Vuitton, its largest brand, “continued its progress thanks to demand driven by the enthusiasm of all of its clientele.” One of the highlights of the quarter was the opening of the first Louis Vuitton Maison in Italy in a mythical cinema theater in Rome. Fendi had a good start to the year and continued the renovation of its store network. While other brands saw rapid growth, “Celine in particular recorded strong revenue growth due to the success of its collections.”

Economic Environment in Europe “Uncertain” 

In the growing watches and jewelry division, organic revenue grew 17%. “All LVMH brands enjoyed good momentum in Europe and expansion of the store network continued in Asia.”

With an increase in retail orders compared to last year, new watches presented at BaselWorld were very well received, “most particularly TAG Heuer’s Link Lady, Hublot’s early models made with its new Magic Gold and Zenith’s Pilot Aeronef.” In jewelry, Bulgari had an excellent start to the year, led by “the remarkable performance of its Serpenti collection.” Chaumet registered good growth in its Asian distribution network.

In its Selective Retailing division, organic revenue growth was 18%. DFS continued to profit from the rapid growth in Asian tourism which particularly benefitted the Gallerias in Hong Kong and Macao. “With robust comparable store growth, Sephora won market share in key regions,” LVMH said. Online sales enjoyed rapid growth. Sephora continued to expand its network of stores and will soon open in Brazil and in Scandinavia.

Despite what it termed “an economic environment which remains uncertain in Europe,” LVMH said it plans to continue to gain market share but with a “strict control over costs.”

LVMH’s report reassured many retail analysts who was closely watching for a slowdown in luxurygoods sales due to Eurozone debt issues and slowdowns in other economies, including China.

“This is a good start to the year,” Rogerio Fujimori, an analyst at Credit Suisse, wrote to investors today. “LVMH offers the most balanced and diversified portfolio in the sector thanks to the ownership of several leading brands with global scalability to emerging markets and attractive profitability.”

Earlier this month, Bernard Arnault, LVMH’s chairman, told investors that the company’s first quarter growth would be higher than its fourth quarter 2011 report, but he didn’t specify whether this was referring to organic growth at 12% or reported growth at 20%.

“While we would agree that the…organic sales growth that LVMH posted in the fourth quarter 2011 was exceptional…we would have expected, following Mr. Arnault’s comments, that the fashion and leathergoods division would continue to track on up 16%,” said Melanie Flouquet, analyst at JP Morgan.

 

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