Q1 fashion sales slowdown for LVMH

Tuesday, 16 April 2013
Aimed to fight the weaker sales at its fashion business, French luxury giant LVMH Moet Hennessy Louis Vuitton SA (LVMH) said Monday it plans to focus investments on product quality and innovation. First-quarter revenue rose 6 percent to 6.94 billion euros, in line with what the market expected.

"LVMH will continue to focus its efforts on developing its brands, will maintain a strict control over costs and will target its investments on the quality, the excellence and the innovation of its products and their distribution," the company said in a note issued Monday.

In the first three months of the year, revenue rose 6 percent to 6.94 billion euros, slightly above the 6.58 billion euros it recorded in the same period a year ago. Organic revenue growth was the main highlight, as it came in at 7 percent, mitigating the negative currency impact.

LVMH Chief Executive Bernard Arnault warned this year that the strong euro would be affect French exporters in the coming months.

Sales at LVMH's key fashion and leather goods division increased by a meagre 0.4 percent to 2.38 billion euros, with growth significantly cooling from the previous quarter, when it was close to 9 percent.

Analysis team at 'Streetinsider' pointed out that “Though top-line results were flat with views, there is an underlying story: LVMH's fashion and leather goods division saw just a 0.4 percent increase in sales, versus nearly 9 percent of growth reported in Q4 last year. That segment includes the noted Louis Vuitton brand, famous for its fashionable handbags.”

Actually, the group has advanced that their plans for Louis Vuitton brand is moving the label's image to a more high-end segment of the luxury market, limiting store openings and giving greater prominence to leather goods, as the group's CEO said earlier this year.

Chinese slowdown

Over the past six months, LVMH shares have risen by about 6 percent, in line with the French benchmark index, highlighted analysts at Dow Jones. LVMH shares closed at 131.25 euros Monday.

Market experts and LVMH peers within the fashion and luxury industry have been flagging their concerns about a possible recession for the consume of luxury goods in China, what has become the main market within the sector.

In this vein, 'SeekingAlpha' finds noteworthy “an important trend to watch is that demand in Europe is getting considerable support from the steady string of tourists pouring in from China which magnifies the impact that Chinese consumers have on the sector.”

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