LVMH, Burberry Lead Luxury Stocks Gain as Sales Beat Estimates
LVMH Moet Hennessy Louis Vuitton SA (MC) and Burberry Group Plc (BRBY) led European luxury-goods stocks higher as both companies reported quarterly revenue gains that beat analysts’ estimates and eased concern over growth this year after last month’s earthquake in Japan.
LVMH, the world’s largest maker of luxury goods, climbed as much as 6.3 euros, or 5.7 percent, in Paris trading, the biggest gain in almost a year. Burberry, the U.K.’s largest luxury retailer, rose as much as 8.6 percent to 1,245 pence in London, the highest since its July 2002 initial public offering.
The sales reports point to continued appetite for leather handbags, champagne and trench coats and suggest Japan’s crisis won’t stall the industry’s global rebound. Burberry raised its earnings guidance and Chief Executive Officer Angela Ahrendts said she was “confident” the company would outperform peers. LVMH cited an “excellent start to the year.”
“There ought to be some initial fears allayed over Japan,” said John Guy, an analyst at Royal Bank of Scotland Group in London.
Demand for luxury goods has revived since the global recession of 2009 as wealthy consumers regained confidence and retailers replenished inventories. Analysts cut estimates for some companies last month after a March 11 earthquake and tsunami in Japan left almost 28,000 people dead or missing and triggered the world’s worst nuclear crisis in a quarter century.
Japan is the world’s second-largest market for luxury goods after the U.S., accounting for 11 percent of the total, according to consulting firm Bain & Co.
‘Setting the Tone’
Revenue rose 17 percent to 5.25 billion euros ($7.5 billion) last quarter, Paris-based LVMH said in a statement yesterday. That compared with the 4.98 billion-euro average estimate of six analysts compiled by Bloomberg. Excluding acquisitions and currency shifts, sales climbed 14 percent. Japan accounts for about 8 percent of the luxury goods maker’s total sales and sales there fell 9 percent in the quarter.
LVMH, which announced in March plans to acquire Bulgari SpA (BUL), the world’s third-largest jeweler, aims “to increase once again in 2011, its leadership of the global high-quality products market,” the maker of Krug champagne said in the statement. Sales in the U.S., Europe and Asia showed “strong momentum,” the company said.
LVMH traded 5.7 percent higher at 115.95 euros as of 3:37 p.m. in Paris. The Bloomberg index that tracks the performance of 12 European fashion retailers increased 4.7 percent.
“LVMH numbers should set the tone and the bar for other luxury names reporting in coming weeks,” Rogerio Fujimori, an analyst at Credit Suisse in London, wrote in a note to clients.
Burberry today said revenue in the quarter ended March 31 rose 32 percent to 390 million pounds ($635 million). The average estimate of three analysts compiled by Bloomberg was for sales of 351.3 million pounds. The quarterly revenue growth was driven by retail sales in China and the reported numbers exclude Spain, where London-based Burberry closed a warehouse and stopped making a local collection last year.
The retailer, which gets less than two percent of sales in Japan, raised its annual earnings guidance. Chief Financial Officer Stacey Cartwright said adjusted pretax profit this year would be at the top end of estimates, between 279 million pounds and 300 million pounds. In January, she said the range was 250 million pounds to 290 million pounds.
Burberry traded 7.2 percent higher at 1,228 pence as of 2:37 p.m. in London.
“While the luxury industry faces global challenges in the year ahead, we remain confident in our team’s ability to outperform,” Burberry’sAhrendts said in the statement.
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