LVMH Points to Asia Slowdown Amid Tougher Luxury-Goods MarketsAndrew Roberts
LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, joined smaller rival Burberry Group Plc in reporting weaker demand in Asia as Chinese shoppers curb spending on handbags and cognac.
LVMH observed a slowdown in the region during the third quarter that was offset by improved growth in Europe and the U.S., the Paris-based company said yesterday after European markets closed. Revenue for the period rose 5.7 percent to 7.4 billion euros ($9.4 billion), about matching analyst estimates.
Burberry, the U.K.’s biggest luxury-goods company, said yesterday that market conditions are deteriorating. Fewer Chinese tourists are shopping in Hong Kong because of pro-democracy protests, while a government crackdown on lavish spending has weakened consumption in China. Worldwide sales of personal luxury products will rise 2 percent this year, the slowest pace since 2009, Bain & Co. estimated yesterday.
LVMH’s report “confirms a rather soft trading environment and should continue to see a negative market reception,” Luca Solca, an analyst at Exane BNP Paribas, said by e-mail.
Sales at both the fashion and leather goods and wines and spirits units were below estimates, while the watches and perfume divisions were better than expected. A 4 percent gain, excluding acquisitions, disposals and currency moves, beat the 3.4 percent increase predicted by analysts.
Nine-month organic revenue in the fashion unit, LVMH’s largest, rose 3 percent, compared with the 4 percent median estimate of 18 analysts compiled by Bloomberg. For the quarter, divisional sales were at best “slightly up,” Solca said.
Wines & spirits remained the only unit to report a drop in sales, weighed down as distributors reduce inventory in China. Organic revenue fell 3 percent in the nine months, compared with the median estimate for a 1.8 percent decline. On a quarterly basis, the decline was “mid-single digit,” Solca estimated.
Sales growth of 5 percent in the watches and jewelry unit and 8 percent in the perfume and cosmetics division exceeded median estimates of 2.6 percent and 6 percent, respectively.
“In an uncertain economic and financial environment, LVMH will continue its strategy focused on innovation and targeted geographic expansion in the most promising markets,” the company said in the statement.
LVMH shares fell 0.4 percent to 125.1 euros in Paris yesterday, taking the decline to 5.7 percent this year and giving the company a market value of 63.5 billion euros.
Burberry, the U.K. maker of $1,600 trenchcoats, said earlier that wholesale revenue will fall in the second half, while handbag maker Mulberry Group Plc forecast that full-year earnings will be significantly below estimates.
Burberry shares fell 3.7 percent to 1,425 pence in London yesterday. Mulberry slumped 10 percent to 675 pence.