LVMH Points to Asia Slowdown Amid Tougher Luxury Markets

on October 15 2014 | in Daily Headlines | by | with No Comments

LVMH observed a slowdown in the region during the third quarter that was offset by improved growth in Europe and the U.S., the Paris-based company said yesterday after European markets closed. Revenue for the period rose 5.7 percent to 7.4 billion euros ($9.4 billion), about matching analyst estimates.

Burberry, the U.K.’s biggest luxury-goods company, said yesterday that market conditions are deteriorating. Fewer Chinese tourists are shopping in Hong Kong because of pro-democracy protests, while a government crackdown on lavish spending has weakened consumption in China. Worldwide sales of personal luxury products will rise 2 percent this year, the slowest pace since 2009, Bain & Co. estimated yesterday.

LVMH’s report “confirms a rather soft trading environment and should continue to see a negative market reception,” Luca Solca, an analyst at Exane BNP Paribas, said by e-mail.

The shares fell 0.6 percent to 124.40 euros at 9:01 a.m. in Paris, taking the decline to 6.1 percent this year and giving the company a market value of 63.2 billion euros.

Sales at both the fashion and leather goods and wines and spirits units were below estimates, while the watches and perfume divisions were better than expected. A 4 percent gain, excluding acquisitions, disposals and currency moves, beat the 3.4 percent increase predicted by analysts.

Nine-month organic revenue in the fashion unit, LVMH’s largest, rose 3 percent, compared with the 4 percent median estimate of 18 analysts compiled by Bloomberg. For the quarter, divisional sales were at best “slightly up,” Solca said.

Wines & spirits remained the only unit to report a drop in sales, weighed down as distributors reduce inventory in China. Organic revenue fell 3 percent in the nine months, compared with the median estimate for a 1.8 percent decline. On a quarterly basis, the decline was “mid-single digit,” Solca estimated.

Sales growth of 5 percent in the watches and jewelry unit and 8 percent in the perfume and cosmetics division exceeded median estimates of 2.6 percent and 6 percent, respectively.

Read more at Bloomberg.

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