Paris—LVMH said Thursday its half year profit increased 28% with strong sales reported in both Asia and the Americas.
Nonetheless, analysts pointed out the luxurygoods giant’s sales in key categories, such as leather goods, continue to be up, but at a slower rate than before.
For its first six months, LVMH posted net profit of 1.68 billion euros (about $2.07 billion). First half profit from recurring operations rose to 2.66 billion, missing analysts’ estimates for 2.71 billion.
Total sales rose 26% to 12.97 billion, excluding currency fluctuations a 12% increase.
Sales in its second quarter rose 10% to 6.38 billion euros (about $7.76 billion), a smaller increase than the 14% rise LVMH saw in its first quarter.
Faced with a slowdown in the U.S. economy, uncertainty over the Eurozone and China’s economy slowing to its slowest pace in three years, there’s growing concern that even affluent consumers may pull back on spending.
But Bernard Arnault, LVMH’s chairman, remains optimistic. “We approach the second half of the year with confidence and are relying upon the creativity and quality of our products as well as the effectiveness of our teams to pursue further market share gains in our historical markets as well as in high potential emerging markets.”
Declining Profit Margin in Fashion, Leathergoods
By division, LVMH’s Fashion & Leather Goods business posted a 10% increase and profit from recurring operations increased 10%. Its leading brand, Louis Vuitton, had “exceptional performance: all its business lines contributed to this momentum. A number of products have waiting lists.”
Still, a declining profit margin in the Fashion and Leather Goods sector was “the main negative surprise,” Deutsche Bank AG analyst Warwick Okines reported. “Profitability was affected by higher marketing costs at Louis Vuitton.”
LVMH reported that Fendi benefited from growth in its iconic Baguette bag, which celebrated its 15th anniversary. Céline, too, was cited “a remarkable performance”
Watches & Jewelry continued to see increases thanks to the addition of Bulgari, which LVMH bought last year. The division had a 13% increase in organic sales and profit from recurring operations increased by 87%, fueled by Bulgari.
“In jewelry, Bulgari reported an excellent performance across all of its product lines and benefited from the growing success of its Serpenti collection,” the company said.
In watches, LVMH reported record orders from BaselWorld. TAG Heuer’s Link Lady collection “has already been a great success” as have been Zenith’s new Pilot models and Hublot’s styles made from “innovative materials perfected by its research laboratory.