July 29 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA, the biggest luxury-goods maker, reported first-half profit growth that beat analysts' estimates after Asian shoppers bought more Vuitton-branded handbags, fashions and leather goods.

Net income climbed 7 percent to 891 million euros ($1.4 billion) from 834 million euros a year earlier, the Paris-based company said today. That surpassed the 857 million-euro median estimate of nine analysts surveyed by Bloomberg. Chairman Bernard Arnault confirmed the company's forecast for a ``tangible increase in results this year'' and said he would increase prices further in the U.S. and Japan.

Revenue is rising between 20 percent and 30 percent in Asia outside Japan, according to Armando Branchini of Milan-based consultancy Interbrand, making LVMH less vulnerable to slowing U.S. and European economies and gains by the euro. Bags co- designed for Louis Vuitton, LVMH's top-earning brand, by designer Marc Jacobs and U.S. artist Richard Price fueled demand.

``The numbers were pretty solid, with wines and spirits and fashion and leather goods the two main divisions driving growth,'' said John Guy, an analyst at MF Global Securities Ltd. in London who advises investors buy the stock. ``They boosted margins at the wines and spirits in a declining market, which showed excellent execution by the company.''

Sales gained 5 percent to 7.78 billion euros, LVMH said, topping the 7.74 billion-euro median of 11 estimates.

The earnings were released after the French stock market closed, where LVMH fell 28 cents, or 0.4 percent, to 68.03 euros. The shares have dropped 18 percent this year, heading for their biggest annual retreat since 2001, amid concern luxury-goods demand is slowing with the world economy.

First Half

First-half profit growth slowed from the 12 percent pace in last year's second half, hurt by a 2 percent drop in sales of spirits and wines. Weaker demand for brands such as Glenmorangie scotch and Krug champagne had weighed on U.S. revenue in the first quarter.

Drinks demand recovered in the second quarter, with sales climbing 13 percent excluding exchange rate fluctuations, LVMH said today. Profit from recurring operations rose 4 percent to 409 million euros.

Sales advanced 6 percent to 2.8 billion euros at the fashion and leather-goods division, LVMH's biggest. Excluding currency effects, the Louis Vuitton brand's sales rose more than 14 percent, spokesman Oliver Labesse said in a telephone interview.

Gucci Demand

PPR SA, the world's third-largest luxury-goods company, said July 23 second-quarter sales increased 4.4 percent on demand for Gucci, Yves Saint Laurent and Bottega Veneta fashions. Gucci brand sales jumped 11 percent on a basis excluding currency effects, beating eight analysts' 5.8 percent gain median estimate.

Cie. Financiere Richemont SA beat first-quarter sales estimates July 16, when it reported a 13 percent gain to 1.43 billion euros on demand for Piaget watches and Cartier jewels in China.

Yves Carcelle, who runs LVMH's fashion and leather goods division, said today that the Louis Vuitton brand showed no signs of a slowdown in July, when sales continued to grow in markets including the U.S.

His division won't slow the pace of store openings in China, for which plans include three more this year and 12 locations in 2009, Carcelle said, adding that he has ``great confidence'' for the rest of the year.

Credit Crunch

LVMH and rival luxury-goods makers are relying on the world's richest people as the credit crunch costs bankers their jobs and housing markets weaken. The dollar has slid 7.4 percent against the euro this year and the yen has lost 3.8 percent. U.S. and Japan account for about a third of LVMH's revenue.

Sales in Asia jumped 25 percent in local currencies and climbed 13 percent after sales in the region were converted into euros on the company's balance sheet. Growth in the region was led by China, Chief Financial Officer Jean-Jacques Guiony said at a presentation to analysts in Paris.

``The whole area is in a very favorable situation,'' Guiony said, citing growth in cities such as Hong Kong and Macau.

Cosmetics retailer Sephora had ``remarkable'' growth, Chief Operating Officer Tony Belloni said at the company's Paris presentation. The gains at Sephora lifted sales of the retail division, which includes Duty Free Shops, by 6 percent.

Perfumes, Cosmetics

Perfumes and cosmetics sales rose 8 percent on new fragrances including Escale a Portofino and Dior Homme Sport, which is being promoted by actor Jude Law, Belloni said.

Sales of wines and spirits jumped 30 percent in Russia and 17 percent in Asia, LVMH's Christophe Navarre said at the presentation, bolstered by new Dom Perignon, Moet & Chandon and Veuve Cliquot products.

Sales of watches and jewelry increased 7 percent in the period. In April, LVMH agreed to buy Swiss watchmaker Hublot, which will be incorporated in the second half of the year. The current operating margin at the unit rose to 18 percent from 15 percent, according to presentation slides on the company's Web site.

To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net.

Last Updated: July 29, 2008 15:28 EDT