LVMH Reports a 22% Increase So Far This Year Amid Concerns of a Luxury Slowdown

Paris—LVMH, the world’s largest luxurygoods conglomerate, reported Monday that sales for the first nine months of the year were up 22% to 19.87 billion euros but that hasn’t dampened concerns that there’s a slowdown in the luxurygoods market.

After taking into account the consolidation of Bulgari, as of June 2011, and a positive currency impact, organic revenue for the first nine months grew by 10%.

By division, Fashion & Leather Goods, which includes its biggest brand Louis Vuitton and Christian Dior, posted a 16% increase from last year, and Jewelry & Watches reported a 25% increase. LVMH’s liquor and beauty businesses also posted double digit increases.

Additionally, LVMH  released its sales for its third quarter, which ended Sept. 30: total revenue rose 15% to 6.9 billion euros (about $8.9 billion) just surpassing analysts’ estimates for sales of 6.88 billion euros. Organic sales growth was 6%.

The third quarter figures were lower than the 12% organic increase of the second quarter but considering the slowdown in China and Europe experienced by other luxurygoods brands, the report is still healthy.

“The U.S. market continued to demonstrate momentum,” LVMH said in a statement. “In spite of a challenging economic environment, Europe and Asia also contributed to the third quarter performance. Louis Vuitton continues to gain market share throughout the world.”

Nonetheless, analysts noted a slowdown in sales from previous quarters: fashion, leathergoods, watches and jewelry grew at 4%, down from 8% in the second and 12% in the first quarter.

“We believe it is fair to assume that the Louis Vuitton brand itself underperformed this 4 percent divisional average,” HSBC analysts said in a note.

”The Appetite for Luxurygoods is There”

Since LVMH only gave vague general terms about Louis Vuitton, its biggest brand accounting for about 75% of its fashion and leathergoods division’s sales, some analysts are concerned that Louis Vuitton is losing sales as consumers in China, in particular, top for more discreet luxury products without logos.

Not helping the concerns about leathergoods is the recent Bain & Co. report that sales of handbags and other items may only increase in sales this year by 5% excluding currency shits, less than half of the pace in 2011.

Although LVMH doesn’t publish comparable growth figures for its divisions, analysts speculated that comparable growth in the watch and jewelry sector was about 2% compared with 9% in the second quarter and 17% in the first.

“For us the disappointments are the watches and fashion and leather goods,” one London-based analyst said Bloomberg.

But speaking on a conference call to analysts, Jean-Jacques Guiony, finance director at LVMH, said that organic third quarter sales growth “doesn’t differ materially from the previous” three months. He noted that the company had raised prices at Vuitton by 8% in Europe in October, adding that “the appetite for luxurygoods is there.”

“The third-quarter figures reflect a tougher environment,” Guiony said. “One shouldn’t see the bottle half empty in my view.”

While there may be “some slowdown here and there”, particularly in Asia outside China, where there were lower tourist flows this year compared with last year. Guiony said there’s been no drop in demand for Vuitton merchandise.

Commenting on Louis Vuitton’s business around the world, Guiony said: “Europe is a bit higher, U.S. a bit lower and China is close to the first half, with low single-digit (growth).”

 

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