LVMH Profit Beats Estimates Quarterly Sales Rise

(Corrects percentage gain in 9th paragraph.)

LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest maker of luxury goods, reported first-half profit that beat analysts’ estimates as demand for its Monogram Empreinte soft leather collections at Vuitton surged.

Net income climbed 25 percent to 1.31 billion euros ($1.9 billion), the Paris-based company said today in a statement after the market closed. The average estimate of five analysts surveyed by Bloomberg was for profit of 1.25 billion euros. Second-quarter sales advanced 9 percent to 5.05 billion euros.

Sales of fashion and leather products, the company’s biggest unit, rose 14 percent on an organic basis as shoppers snapped up designs by Celine and Fendi. LVMH has expanded its leather-goods capacity and increased a stake in Hermes International (RMS) SCA, the maker of Birkin bags, as demand for accessories surges. LVMH sees no sign of a slowdown in luxury goods this year, the company said.

“The luxury sector has not been affected by the recent economic turmoil,” Barclays Capital analysts including Vicki Lee said in a July 19 note to clients. Lee has an “overweight” rating on the stock.

LVMH, which first disclosed it had built up an Hermes stake in October, said today it owns 21.4 percent of their Paris-based rival, up from 20.2 percent reported earlier.

LVMH fell 55 cents, or 0.4 percent, to 130 euros today in Paris. The shares have gained 5.6 percent this year, giving the maker of Moet & Chandon champagne and $6,000 TAG Heuer chronographs a market value of 66 billion euros. The company will pay an interim dividend of 80 cents on Dec. 2.

Global Luxury Demand

Global sales of luxury goods may rise 8 percent this year excluding currency swings as demand strengthens in the U.S. and Europe and emerging-market shoppers splurge, Bain & Co. estimated in May.

“We approach the second half of the year with confidence,” LVMH Chief Executive Officer Bernard Arnault said in the statement.

First-half profit from recurring operations rose 22 percent to 2.22 billion euros, LVMH said. The current operating margin reached 22 percent, a record for the period. First-half revenue increased 13 percent to 10.3 billion euros, or 15 percent excluding currency swings and acquisitions, the company said.

On a local currency basis, first-half sales gained 26 percent in Asia, 17 percent in the U.S., excluding Hawaii and 8 percent in Europe, the company said in a presentation. Revenue fell 6 percent in Japan.

Bulgari Purchase

LVMH, which in March agreed to buy Bulgari SpA for about 4.3 billion euros including debt, posted growth in watch and jewelry sales of 27 percent, excluding currency swings and the impact of acquisitions. The unit opened more TAG Heuer stores and introduced a women’s range in the Formula 1 line.

First-half sales of wines and spirits gained 13 percent, while perfume and cosmetics advanced 11 percent, LVMH said. Revenue at the selective retailing unit, which includes Sephora and DFS, rose 18 percent.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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