April 10 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA gained after the world’s largest luxury-goods company reported its fastest fashion and leather-goods sales growth in two years, cushioning an unexpected decline in alcohol sales.
The stock rose as much as 4.3 percent in Paris trading, the steepest intraday gain in three months. First-quarter sales of clothing and leather items such as Louis Vuitton bags climbed 9 percent on an organic basis, LVMH said yesterday in a statement after European markets closed. Analysts predicted a 6 percent sales gain.
“The clear highlight in the first quarter was the much better-than-expected performance in fashion and leather,” Eva Quiroga, an analyst at UBS, wrote in a note to investors. She has a buy recommendation on the stock.
LVMH is introducing more expensive products at handbag maker Louis Vuitton, while increasing investment at some of its smaller fashion brands amid competition from lower-priced labels such as Michael Kors and Coach Inc. Italian rival Prada SpA last week forecast slowing same-store sales growth in the financial year through January 2015, citing a strong euro and weakening demand in China.
LVMH doesn’t report earnings at the end of the first quarter. The shares traded 3.9 percent higher at 141.75 euros as of 10:03 a.m. in Paris, where LVMH is based, giving the maker of Celine sandals and Belvedere vodka a market value of about 72 billion euros ($100 billion). The shares have advanced 6.8 percent this year.
The cognac business is struggling due to a clampdown by Chinese President Xi Jinping’s government on lavish spending on banqueting and gifts. Sales of wines and spirits fell 3 percent on an organic basis. Analysts predicted growth of 3 percent. It was the unit’s first decline since the fourth quarter of 2009, according to Mario Ortelli, an analyst at Sanford C. Bernstein in London.
The worse-than-expected alcohol sales were mainly driven by overstocking by Chinese retailers in the fourth quarter, Ortelli wrote in a note to investors. Fashion and leather-goods sales were “stellar,” as Loro Piana, the cashmere clothier LVMH acquired last year, contributed “significantly,” said the analyst, who has an outperform recommendation on the stock.
Total revenue advanced 4 percent to 7.21 billion euros, LVMH said. Analysts predicted 7.4 billion euros, according to the median of 17 estimates compiled by Bloomberg.
Pernod Ricard SA, which makes Martell cognac, said Feb. 13 that first-half sales to China fell 18 percent on an organic basis as the government continued to restrict spending. Remy Cointreau SA, the maker of Remy Martin, said in January it anticipated no relief for sales of cognac from Chinese New Year, which fell at the end of that month and is a key festival for consumption and gifts of the spirit.
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