LVMH Profit Beats Estimates as Fashion Unit Outperforms

  • Fourth-quarter sales rose 5%, besting 3.9% analyst consensus
  • Watch brands hurt by `cautious purchasing behavior,' LVMH says

LVMH, the world’s largest luxury company, reported annual profit that beat estimates as fashion and leather-goods sales exceeded expectations in the final quarter.

Profit from recurring operations advanced 16 percent to 6.61 billion euros ($7.2 billion), Paris-based LVMH said Tuesday after markets closed. Analysts predicted 6.5 billion euros, according to the average of 27 estimates. Fourth-quarter revenue rose 5 percent on an organic basis, topping the 3.9 percent estimate, thanks to “strong progress” in Europe, the U.S. and Japan, it said.

Operating scores of brands across six product groups from fashion to champagne has helped cushion LVMH from slowing luxury demand. The company’s flagship label Louis Vuitton is growing again after a revamp and had a “remarkable year,” the company said. Demand for Bulgari jewelry is offsetting weak watch sales, while sales of champagnes such as Krug and Veuve Clicquot are helping compensate for low consumption of X.O. cognac in China.

On a conference call, LVMH Chief Executive Officer Bernard Arnault expressed confidence that the group can continue to outperform its luxury sector peers in the upcoming year, despite an “uncertain” business climate.

Largest Division

Fashion and leather-goods is LVMH’s largest division, accounting for more than a third of sales and more than half of earnings before interest and tax. Quarterly sales at the unit that includes brands such as Fendi, Celine and Givenchy rose 3 percent, beating estimates for growth of 1 percent. The watches and jewelry division also posted a 3 percent gain, although that was well below the 8 percent expected by analysts.

“The watch brands were impacted by the cautious purchasing behavior of multi-brand retailers,” LVMH said. Watch makers are grappling with a raft of problems, such as fewer wealthy Asian buyers shopping in Europe.

Sales in Japan rose 12 percent in the fourth quarter, and were up 6 percent in Europe and by 5 percent in the U.S. Growth in the U.S. slowed slightly in the period, the company said on the conference call. LVMH shares fell 1.7 percent to 145.2 euros on Tuesday in Paris.

(An earlier version of this story corrected the date of the results statement.)

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