PARIS — Shares in LVMH Moët Hennessy Louis Vuitton fell sharply on Friday after the French luxury giant reported a 4.3 percent dip in net profits in the first half amid slowing Asian demand for fashion and leather goods.
LVMH shares closed down 6.8 percent to 131.65 euros, or $181.23 at current exchange, on the Paris stock exchange. LVMH had published its results after the stock market close on Thursday.
Thomas Chauvet, analyst at Citi, predicted the stock would take a significant hit as a result of the earnings miss; a larger-than-expected sequential slowdown in second-quarter revenue trends; continued destocking of cognac in China, and an unexpected slowdown in sales of fashion and leather goods in Mainland China and Hong Kong.
Chauvet forecast the consensus forecast for full-year earnings before interest and taxes (EBIT) of 6.36 billion euros, or $8.56 billion, would be downgraded by 5 percent to 6 percent as a result, though he reiterated his buy recommendation on the stock.
Crédit Suisse noted markets were unprepared for the sudden sales slowdown in Asia.
“We and the market knew that Japan would be a big factor,” it said in a research note. “But what really surprised us in the call was the magnitude of the sequential slowdown for Fashion & Leather across key Asian markets like Hong Kong, Mainland China and Singapore.”
“One quarter does not make a trend and we continue to see mid-single digit growth for LV as a sensible run-rate growth assumption especially in a sluggish environment for luxury goods in Asia-Pacific and Europe in particular,” Crédit Suisse added.
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