LVMH Rises Most Since 2010 on Fashion Sales Growth ReboundAndrew Roberts
LVMH Moet Hennessy Louis Vuitton SA rose the most in more than three years in Paris trading after saying growth in fashion and leather-goods sales rebounded in the fourth quarter, boosting optimism for a turnaround.
The shares advanced as much as 6.9 percent to 131 euros, the steepest intraday gain since May 10, 2010.
Fashion and leather-goods sales rose 7 percent on an organic basis in the final three months of the year. Growth accelerated from 4 percent in the first nine months of 2013, after a weaker third quarter had prompted concern that efforts to revive the Vuitton brand may not be taking hold.
The improved performance of the unit was the “main positive” in yesterday’s full-year results, Rogerio Fujimori, an analyst at Credit Suisse, said in a note. Growth at the wines & spirits division that met estimates was also a plus in light of recent disappointing figures from competitors, he said.
LVMH shares were up 6.2 percent at 130.05 euros as of 10:35 a.m. in Paris. Before today, the stock had fallen 7.6 percent this year on concern over slowing luxury-goods sales in Asia. Shares in Christian Dior SA, the company through which billionaire Bernard Arnault controls LVMH, also rose.
LVMH’s results provided comfort for investors after luxury companies such as Cie. Financiere Richemont SA, Tod’s SpA and Mulberry Group Plc reported weaker-than-estimated sales. Italian shoemaker Salvatore Ferragamo SpA also reported revenue that met estimates yesterday as sales gained 9 percent in the fourth quarter at constant exchange rates.
Ferragamo shares rose as much as 7.7 percent to 23.73 euros in Milan, the steepest advance since Nov. 15.
“Uncertainty surrounds the outlook for the sector, but with an attractive business model and valuation, combined with a strong management record, we retain our buy rating” on LVMH, said Christopher Walker, an analyst at Nomura International Plc.
Each of the company’s fashion and leather-goods brands “offers fine potential,” Bernard Arnault said yesterday at a presentation in Paris. “Analysts might be more interested in the immediate future. But for us, we are looking at the 10-year to 15-year potential and I think we have reason to be confident. There may be ups and downs that could be economic or geopolitical upheavals, but we have a strong trend.”
Louis Vuitton is introducing more expensive products and opening fewer stores as LVMH’s biggest and most profitable brand seeks to move upscale amid softening demand in Europe and Asia. The transition is going to take some time, Chief Financial Officer Jean-Jacques Guiony has said.
LVMH is boosting investment in some of its smaller fashion brands and buying stakes in others as it seeks to reposition Vuitton. It’s also shuffling Vuitton’s management, appointing Delphine Arnault as executive vice president and Nicolas Ghesquiere as artistic director last year.
Profit from recurring operations climbed 2 percent to 6.02 billion euros ($8.2 billion), LVMH said yesterday, matching the median of 19 analysts’ estimates compiled by Bloomberg.
Total 2013 revenue advanced to 29.15 billion euros. Analysts predicted 29.4 billion euros. Sales rose 8 percent on an organic basis, matching estimates.
“Despite an uncertain economic environment in Europe, LVMH is well-equipped to continue its growth momentum across all business groups in 2014,” the company said.