LVMH, the world’s biggest luxury goods company, reported higher-than-expected revenue growth for the third quarter on Monday, setting a high bar for peers after strong sales at its fashion brands.
LVMH, home to labels like Louis Vuitton, Christian Dior and Moet & Chandon champagne, said like-for-like revenues, which strip out currency swings and acquisitions or disposals, grew 12 percent from a year earlier to €30.1 billion ($35.4 billion).
That beat the 9 percent organic growth forecast in an analyst poll compiled for Reuters by Inquiry Financial and was stable from the previous quarter, in spite of a weaker showing by LVMH’s spirits unit and a tricky foreign exchange climate.
A strengthening euro risks putting tourists off spending in many European destinations, even as visitors return following a spate of attacks in Europe.
LVMH's results were almost universally stronger than expected. Its key Fashion & Leather goods division, which accounts for about 50% of sales, posted organic revenue growth of 13%, well ahead of analyst forecasts of about 9%. Perfumes and cosmetics sales, gained 17% against forecasts of 9% growth, benefitting notably from the launch of Rihanna's Fenty Beauty label, which is sold through LVMH's Sephora retail chain. Sales of watches & Jewelry, which include Tag and Hublot time pieces, rose 14%, beating expectations of an 11% increase.
The only miss in the results came from the Wine & Spirits division, which accounts for about 20% of LVMH sales, where revenues grew 4%, missing analyst forecasts of about 6% growth, due largely to supply constraints in cognac production.
Rivals due to post trading updates in the coming weeks include fellow Paris-based conglomerate Kering, owner of Gucci, and standalone fashion houses such as France’s Hermes and Britain’s Burberry.
Luxury goods makers have enjoyed a revival in Chinese appetite for their watches, high-end clothes and handbags and expensive wines and whiskeys in the past year after an economic downturn that hit the industry hard.
Other headwinds on top of unfavorable currency effects still lurk, however. They include diplomatic tensions in Asia, a vital market, amid a stand-off between the United States and North Korea over the latter’s nuclear tests, which analysts say could make consumers in that region more cautious and affect tourist spending if the situation worsens.
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