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By
Reuters
Published
Apr 18, 2012
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LVMH says Q1 sales up 25 per cent, Asia strong

By
Reuters
Published
Apr 18, 2012

LVMH, the world's biggest luxury goods group, said first-quarter revenue grew 25 percent thanks to particularly strong growth in Asia and the United States, as wealthy shoppers shrugged off a tumultuous global economy.

Nevertheless, the French company, owner of brands such as Moet Hennessy and fashion designer Celine, described the economic outlook for Europe as uncertain and said it would keep a tight control over costs.

Quarterly sales rose 14 percent on a like-for-like basis to 6.58 billion euros ($8.7 billion), with the strongest divisional growth seen at mall-friendly cosmetics retailer Sephora and shopping centres chain Dfs.

Growth was also spurred by unexpected strength in the Wine & Spirits division, several analysts said, due to an increase in both volume and prices. LVMH said volume in champagne rose by 5 percent, while Hennessy cognac rose 9 percent.

The all-important Fashion & Leather goods division, which accounts for around a third of the company's revenue and grew 12 percent on an organic basis for the quarter, came in slightly below some analysts expectations, however.

LVMH CEO Bernard Arnault made what some considered bullish comments at the annual shareholders' meeting in early April, saying first-quarter growth was above what it had been in the last quarter of 2011.

And while this was true, the growth did not come primarily from Fashion & Leather as some expected, indicating the Louis Vuitton brand, which accounted for half of group operating profit in 2011, had not performed to the dazzling levels of last year.

At 0900 GMT LVMH shares were down 1 percent in a flat market.

"Some in the industry felt a little caught out," said an analyst who asked not to be named.

PERFORMING WELL

The luxury industry has performed well despite uncertainty and economic slowdown around the world. Strong growth in emerging markets, plus a tendency among Asian shoppers to buy luxury goods when on vacation in Europe, have particularly helped companies like LVMH.

But all eyes are on the horizon for any signs that these wealthy Chinese and South American shoppers may be closing their purses.

Such worries helped drive down Burberry's share price 5 percent on Wednesday when the company failed to outperform analyst expectations on its sales growth.

"They didn't perform badly," said the analyst. "They just didn't 'wow'."

LVMH has been trying to secure its business by gaining footholds in a variety of luxury divisions with dispersed geographic sales.

Last year it bought Italian jeweller Bulgari, helping to account for a 141 percent rise in reported revenue growth for the quarter in the watches and jewellery division.

LVMH, which took the luxury world by surprise in late 2010 by announcing it had built a stake in Hermes, said in December its holding had risen to 22.3 percent though it repeated it did not want to buy the maker of Kelly handbags and silk scarves.

In February, Chief Executive Bernard Arnault said the company's priority remained organic growth, with acquisitions the exception.

Reports that LVMH was in talks to buy German books-to- perfumes retailer Douglas were not true, a source told Reuters. Douglas has not been in contact with LVMH, a financial source said.

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