By  on October 18, 2006

PARIS — Mini monogram handbags were popular items in the third quarter, but did not quite translate into big enough sales gains for LVMH Moët Hennessy Louis Vuitton.

Due to shortfalls in its wines and spirits division, the French luxury goods giant missed analysts' expectations in reporting a 6.8 percent rise in third-quarter sales to 3.66 billion euros, or $4.66 billion at average exchange rates for the period.

Still, the company trumpeted double-digit organic sales growth in the three months ended Sept. 30, and good momentum in key geographic zones.

"The U.S. market continues to be a strong contributor to our growth," Jean-Jacques Guiony, LVMH's finance director, told analysts during a conference call on Tuesday. "All businesses are in line or better than in the first half of the year."

In dollar terms, group sales rose 11 percent on the mainland U.S., with watches and jewelry rocketing 27 percent and perfumes and cosmetics up 13 percent.

Europe and Asia were also standout markets, despite reduced spending by Japanese tourists due to a weaker yen. For the nine months, group revenues in euros leapt 17 percent in Asia and 12 percent in Europe.

During the call, Guiony highlighted the "ongoing success" of the cash-cow Vuitton brand, and the "underlying strength" of LVMH's wines and spirits business, whose third-quarter sales were dented partly by timing issues, including an autumn festival in China that falls later on the calendar in 2006 than it did last year.

The firm, citing a "well-oriented economic environment," reiterated its objective of a "very significant" increase in profits for the full year.

Still, some analysts detected a marginal deceleration. The numbers also suggest European luxury firms, which have been on a roll, could see momentum slow in the second half due to the strong euro, which puts a crimp in sales reported from dollar and yen regions.

Pummeled with questions about the wines and spirits division, Guiony stressed that its sales per quarter are difficult to assess. "Don't make three months a trend," he said, also noting restrictions on carry-on liquids on aircrafts had "no meaningful impact" on duty-free liquor sales.Analysts seemed less concerned about Vuitton, which powered ahead thanks to the strength of iconic handbags like the Lockit and the Speedy, recently interpreted by major artists for an exhibition at the Espace Louis Vuitton gallery here.

Vuitton opened seven stores in the third quarter, including in Budapest, Dubai and Macao, bringing its network to more than 360 locations.

Analysts also made no mention of underperforming brands like Donna Karan.

Meanwhile, Fendi received praise from LVMH for "rapid growth" of its ready-to-wear by Karl Lagerfeld, as well as its Spy and B. Fendi handbags. LVMH said the Rome-based house continues to renovate its store network and add select locations, like a new boutique in Geneva.

LVMH also cited good sales in the quarter of Loewe's Amazona handbag line, Berluti's la Démesure collection, as well as accessories bearing the Marc Jacobs and Marc by Marc Jacobs labels.

For the nine months, group sales rose 10.7 percent to 10.63 billion euros, or $13.55 billion, and all business units, except selective retailing, posted double-digit gains.

Sales through Sept. 30 increased 12.5 percent to 1.89 billion euros, or $2.42 billion, for wines and spirits; 10.2 percent to 3.73 billion euros, or $4.75 billion, for fashion and leather goods; 11.9 percent to 1.81 billion euros, or $2.3 billion, for perfumes and cosmetics; 21.6 percent to 489 million euros, or $623.5 million, for watches and jewelry, and 6.6 percent to 2.72 billion euros, or $3.47 billion, for selective retailing.

Shares in LVMH slipped 2.4 percent Tuesday to close at 80.65 euros, or $100.97 at current exchange, on the Paris Bourse.

Separately on Tuesday, Christian Dior Couture reported a 10 percent organic rise in its third-quarter sales, with nine-month revenues totaling 522 million euros, or $649.4 million.

In an interview, Dior chief executive Sidney Toledano cited strong sales of Dior's Gaucho and Cannage leather goods during the period. "And we have a series of bags coming to sustain the growth," Toledano added. He also cited strength with Dior Homme men's wear and fine jewelry, particularly the floral-motif Diorette collection.

Dior opened eight stores in the quarter, including units in Macau, Taiwan and Abu Dhabi, bringing its total to 210 locations. A Kuwait store opened on Tuesday and Toledano was headed to Moscow for the opening Thursday of a Red Square flagship, an event attended by the likes of Sharon Stone and LVMH chairman Bernard Arnault.

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