By  on April 26, 2007

PARIS — Consumers continue to have Champagne tastes and budgets to match.

Citing robust sales of expensive liquors, checkered handbags and sport watches, LVMH Moët Hennessy Louis Vuitton said first-quarter sales jumped 7 percent, to 3.8 billion euros, or $5.03 billion, from 3.56 billion euros, or $4.27 billion. Stripping out the impact of exchange rates, the increase stood at 13 percent.

Currency conversions were made at average exchange rates for the respective periods.

"Despite an unfavorable currency environment, we remain very optimistic," Jean-Jacques Guiony, LVMH's finance director, told analysts during a conference call on Wednesday. "None of our markets are showing any signs of slowing down."

He cautioned, however, that capacity constraints, particularly in wines and spirits, could constrain growth for the balance of the year.

The French luxury giant trumpeted double-digit organic growth across all business groups for the three months ended March 31, and sales momentum in line with the fourth quarter of 2006.

Guiony declined to indicate sales trends for April, but stressed the U.S., Asia and Europe performed particularly well in the quarter. "We see no signs of slowing down in the U.S. for the time being," said Guiony, noting sales of Vuitton products accelerated in that market during the first quarter.

In local currency, sales of fashion and leather goods jumped 14 percent in the U.S., and watches and jewelry climbed 32 percent. Overall, U.S. sales rose 12 percent.

Analysts applauded the strong numbers, which beat expectations, while citing concerns about soft sales in Japan, particularly for the cash-cow Vuitton brand.

Guiony said sales gains for Vuitton were double-digit in all markets except Japan, where first-quarter sales were "slightly" negative. "We expect sales to be flattish in Japan in 2007," he added.

Analysts questioned Vuitton's ability to continue raising prices in Japan to compensate for the weakness of the yen. Guiony suggested any future increases would be applied to more expensive products, as opposed to entry-level items. "I think there's a limit where entry-level price points are concerned," he noted.

By division, reported sales advanced 9 percent for wines and spirits, to 689 million euros, or $902.9 million; 3.9 percent in fashion and leather goods, to 1.35 billion euros, or $1.76 billion; 11.1 percent in perfumes and cosmetics, to 663 million euros, or $868.8 million; 20 percent in watches and jewelry, to 189 million euros, or $247.7 million, and 5.1 percent in selective retailing, to 941 million euros, or $1.23 billion.

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