LVMH Moet Hennessy Louis Vuitton SA fell to the lowest in five months in Paris trading after saying weaker Asian demand contributed to the slowest growth in sales of fashion and leather products in more than three years.
Sales at Louis Vuitton, the company’s largest brand, were “flattish” in China in the first quarter, with shopper numbers down in most shopping malls, Chief Financial Officer Jean-Jacques Guiony said today on a conference call. Spending by Japanese tourists fell as Paris-based LVMH raised prices, he said. The shares declined 3.8 percent.
“At this point in time we are missing demand from the Asian part of the world, which is obviously a key driver,” Guiony said, adding that consumers from the region account for about 50 percent of Vuitton sales. LVMH raised Vuitton prices by about 12 percent in Japan and by 3 percent to 4.5 percent in other parts of the world in the quarter, the CFO said.
LVMH late yesterday reported growth of 3 percent in first-quarter fashion and leather goods revenue, excluding currency swings and acquisitions, the weakest performance since the fourth quarter of 2009. Analysts predicted a 5 percent gain.
The slowdown in the most profitable of LVMH’s five divisions will weigh on the company’s margins, Eva Quiroga, an analyst at UBS AG, said today in a note to clients. Quiroga has a neutral recommendation on the shares.
LVMH’s closing share price of 126.25 euros was the lowest since Nov. 16. Salvatore Ferragamo SpA also fell, dropping 3.4 percent to 20.83 euros in Milan, while Burberry Group Plc declined 1.4 percent to 1,266 pence in London.
LVMH is including more leather and fewer logos in Vuitton’s product mix as it seeks to make its biggest brand more desirable amid concern that consumers are tiring of its monogrammed laminated canvas bags. It is also opening fewer stores. Vuitton won’t seek revenue growth at all costs, LVMH Chief Executive Officer Bernard Arnault said in January.
“The strategic shift by mega-brands makes portfolio management vital for luxury groups,” said Luca Solca, an Exane BNP Paribas analyst. Brands such as Vuitton will increasingly become “cash cows,” while faster-growing labels “take on a more and more important role in growing group profits.”
Vuitton’s quarterly sales growth was “not materially different” from the rest of the fashion and leather-goods unit, while brands such as Celine posted higher sales, Guiony said.
Italian fashion-goods maker Prada SpA this month reported an uneven start to the year, saying cold weather, the economic crisis in Europe and threats of nuclear strikes by North Korea had hurt demand.
LVMH’s total first-quarter sales climbed 6 percent to 6.95 billion euros ($9.1 billion), matching the average of 13 estimates compiled by Bloomberg. Sales rose 7 percent excluding exchange-rate fluctuations and acquisitions, compared with 14 percent in the first quarter of last year and 8 percent in the final three months of 2012.
Revenue climbed 7 percent in the U.S. excluding Hawaii, and 12 percent in each of Japan and Asia on an organic basis, LVMH said. Sales in Europe were unchanged in the quarter.
A 17 percent organic gain at the selective retailing unit, which includes beauty retailer Sephora and DFS duty-free stores, helped offset a weaker-than-expected performance in all other divisions. Analysts predicted a 12 percent rise at the unit.
First-quarter sales of wines and spirits rose 7 percent on an organic basis as “robust” demand for champagne in Asia made up for a “softer” performance in Europe, LVMH said.
Perfume and cosmetics sales gained 5 percent excluding currency moves and acquisitions, while revenue from watches and jewelry increased 2 percent, LVMH said.