LVMH: 22 percent up yet slowest growth in 3 years

Despite an impressive 22 percent rise in revenue for the first nine months of the year and a 8 percent increase in sales sales across its fashion division, LVMH has reported the slowest quarterly sales growth since the last three months of 2009. The reason? A sluggish demand for leather goods and watches, according to the company.

The owner of a good deal of brands including Bulgari, Louis Vuitton and Celine, recorded a revenue of 19.9billion euros for the first nine months of 2012 with the group delivering a 15 percent rise in revenue for the third quarter.

Commenting LVMH’s report for ‘The Irish Times’, Leopold Authie, a Paris-based analyst at Oddo and Cie, said "This set of results is not the greatest we have seen at LVMH." He added that "Many investors were very worried about a potential faster deceleration given the current context, notably in Asia-Pacific."

Organic revenue, which excludes currency swings and acquisitions, climbed 6 percent in the third quarter, Paris- based LVMH said yesterday after markets closed, missing the 7 percent average estimate of 10 analysts surveyed by Bloomberg.

In declarations for Bloomberg, Thomas Chauvet, an analyst at Citigroup Inc. in London pointed out that sales were “disappointing” in high-margin divisions. Negative investor sentiment toward the luxury-goods industry is “likely to prevail near term,”

Growth in LVMH’s fashion and leather-goods sales slowed to 4 percent in the quarter, while revenue from watches and jewelry gained between 1 percent and 2 percent, excluding currency swings and acquisitions, Chauvet estimates.

But if there was a segment within the group that outstood during the past three months it was LVMH's selective retailing business, which includes luxury malls and the Sephora cosmetic superstores, and which saw its sales rose 20 percent. The company said that selective retailing was making especially strong gains in China and Russia.

In a conference with analysts held in Paris on Tuesday, LVMH revealed as well that its watches and jewellery division were up 7 per cent “stripping out the effect of acquisitions”. Fashion and leather goods - the largest division by sales-, reported an 8 percent rise in revenues to 5.8billion pounds. Perfumes and cosmetics added 8 percent to 2.1billion pounds.

Total revenue in the quarter rose 15 percent to 6.9 billion euros, LVMH said, adding it remains confident in its outlook for 2012. The median of six analysts’ estimates compiled by Bloomberg was 6.88 billion euros.

With regards to the last trimester, the group said that sales were up 15 per cent to 6.9 billion euros and that all of its business groups saw gains in this period.

French luxury giant LVMH Moet Hennessy Louis Vuitton SA dropped the most in the Paris CAC 40 Index (CAC) after reporting its slowest growth for the past three years. The stock fell 1.6 percent. The loss was more evident when compared with the 0.9 percent that the French benchmark index made.

“While we like the group’s defensive qualities, we believe there are better opportunities elsewhere in the sector,” said to Reuters Allegra Perry, an analyst at Cantor Fitzgerald in London. She currently has a ‘hold’ recommendation over the shares.

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