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LVMH Profit Beats Estimates on Rising Fashion Sales

July 27 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, reported first-half profit that beat analysts’ estimates as sales of fashion and leather goods accelerated in the second quarter.

Net income rose 53 percent to 1.05 billion euros ($1.36 billion), the Paris-based company said today in a statement after the market closed. The average estimate of 10 analysts compiled by Bloomberg was 956.2 million euros. Second-quarter sales advanced 22 percent to 4.63 billion euros.

Demand for luxury goods is returning as Chinese shoppers buy more high-end clothing and accessories, and U.S. and European retailers replenish inventories after the recession. Hermes International SCA, the French maker of luxury handbags and silk scarves, said last week that revenue may grow as much as 12 percent this year, excluding currency swings.

“Visibility on results for the sector and particularly for LVMH should be quite good over the next 12-18 months,” HSBC analysts Erwan Rambourg, Antoine Belge and Sophie Dargnies wrote in a July 7 note. Demand for Louis Vuitton luggage and Hennessy cognac will remain “resilient” and currency fluctuations will offer a “substantial boost” to margins, the analysts wrote. They have an “overweight” rating on the stock.

LVMH fell 2.77 euros, or 2.9 percent, to 92.26 euros today in Paris. The shares have gained 18 percent this year, giving the maker of Moet & Chandon champagne and TAG Heuer watches a market value of 45.2 billion euros.

Product Launches

“In the current recovery from the economic crisis, LVMH will continue to gain market share thanks to the numerous product launches planned before the end of the year, to its geographic expansion in promising markets and to its cost management,” the company said in the statement.

First-half revenue increased 16 percent, or 14 percent excluding currency swings and acquisitions, LVMH said.

On a local currency basis, sales gained 18 percent in the U.S., 21 percent in Asia and 11 percent in Europe, the company said at a press conference. Sales rose 27 percent in China.

At the fashion and leather-goods unit, the company’s largest, sales climbed 18 percent, LVMH said. Watch and jewelry revenue advanced 28 percent, slowing from the first-quarter’s 33 percent surge, as restocking effects faded.

Sales of wines and spirits gained 21 percent, while perfume and cosmetics advanced 12 percent, LVMH said. Revenue at the selective retailing unit, which includes Sephora and DFS, rose 14 percent.

To contact the reporters 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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