Suggesting luxury has been unruffled by recent financial turbulence, LVMH Moët Hennessy Louis Vuitton said sales accelerated in the third quarter, gaining 10.3 percent to total 4.03 billion euros, or $5.54 billion, versus 3.66 billion euros, or $4.67 billion, a year ago.
The world's biggest luxury group beat forecasts and posted double-digit organic gains across all business groups, trumpeting the "stellar" performance of Louis Vuitton and Hennessy cognac in the three months ended Sept. 30.
"I'm very pleased with the figures and they show both the strength of our brands and the underlying strength of the markets," Jean-Jacques Guiony, LVMH's finance director, said during a conference call on Monday.
Stripping out the impact of currency, which shaved five points off totals, the increase in the quarter stood at 15 percent, fueled by strong gains in Asia, the U.S. and improvements in Japan.
Guiony also cautioned against reading too much into Japan's improvements. "I think we have to remain cautious at this stage, even if we are experiencing some comeback in this market," he said.
"This clearly illustrates our view that consumer demand for luxury goods on average has been unaffected by the recent credit and real estate turmoil," Goldman Sachs analyst Jacques-Franck Dossin wrote in a research note, declaring the three-month period LVMH's best quarterly performance in two years.
Analysts also applauded the continued rebound in Japan. "We view this as great news given the overwhelming importance of Japanese purchases for the sector," Dossin wrote.
Despite the strong showing, especially for high-margin businesses like leather goods and liquors, LVMH did not ramp up its earnings guidance, reiterating its objective of a "significant increase" in results for the full year. During the call, Guiony balked at suggestions LVMH was being cautious. "We are simply realistic," he said. "The businesses are pretty strong, but the currencies are not particularly favorable."
Asia in particular is "booming," he said, citing an increase "in excess of 50 percent" for Vuitton in China in the first nine months of the year. In euro terms, sales in Asia vaulted 14 percent in the nine months, with a 20 percent gain in fashion and leather goods and a 22 percent rise in wines and spirits.Analysts applauded strong growth in LVMH's core fashion and leather goods business, with third-quarter sales up 12.4 percent to 1.42 billion euros, or $1.95 billion. All currency conversions were made at average exchange rates for the respective periods.
At Vuitton, the entry-price Neverfull, Monogram Vernis Amarante and Damier Azur leather goods lines powered sales in the quarter, with new products generally accounting for anywhere from 20 to 30 percent of sales, Guiony noted.
The company disclosed plans to construct a new shoe workshop for Vuitton in Fiesso, Italy, to support the category, while noting footwear accounts for less than 5 percent of brand sales.
Fendi continued to post double-digit sales gains, with particular strength in the Middle East and Asia. On Friday, Fendi plans to reprise its spring-summer 2008 runway show on the Great Wall of China near Beijing, reinforcing strong growth of ready-to-wear designed by Karl Lagerfeld, as well as bags and shoes.
Guiony noted that all of LVMH's fashion and leather goods brands posted positive figures in the nine months, but gave special mention to the fastest growing ones: Marc Jacobs, Givenchy, Berluti and Loewe.
Watches and jewelry posted the biggest quarterly increase, up 13.1 percent to 199 million euros, or $273.8 million, a 19 percent increase in organic terms. LVMH cited double-digit gains for Tag Heuer, Zenith, Chaumet, De Beers and Montres Dior, whose rubber Christal model is a new bestseller. Robust growth at Guerlain and continued momentum at Parfums Christian Dior headlined a 12.4 percent rise in third-quarter sales for perfumes and cosmetics, to 697 million euros, or $958.9 million. LVMH cited strength in Europe and Asia, and successful launches for Dior's Midnight Poison and Guerlain's fragrance, L'Instant Magic.
In selective retailing, a surge in Asian tourism drove sales at DFS, particularly in Hong Kong and Singapore, while Sephora continued to gain market share in Europe and America. In the nine months, like-for-like sales at Sephora were up 6 percent in the U.S. and 9 percent in France, Guiony said.
Sales of wines and spirits gained 12.6 percent to 759 million euros in the third quarter, or $1.04 billion, led by demand for rose Champagne and premium cognacs.For the nine months, sales rose 7.6 percent to 11.45 billion euros, or $14.75 billion, from 10.63 billion euros, or $13.57 billion, a year ago. In organic terms, sales rose 22 percent for watches and jewelry, 14 percent for both fashion and leather goods and wines and spirits, 12 percent for perfumes and cosmetics and 11 percent for selective retailing.
In dollar terms, sales in the U.S. rose 13 percent in the nine months, while in yen, the increase in Japan stood at 4 percent. Analyzing the rebound in Japan, with sales up roughly 10 percent in the third quarter, dominated the question-and-answer session.
"The Japanese population is aging, so we should adapt," Guiony said. "The shape of consumption is changing from the Nineties, where people were buying nondurable goods."
Shares in LVMH rose 2.54 percent on Monday to close at 87.68 euros, or $124.33 at current exchange, on the Paris Bourse.
Separately on Monday, Christian Dior SA, parent of LVMH and the Dior fashion house, reported figures largely in line with the LVMH results, with nine-month sales totaling 12.0 billion euros, or $16.5 billion.
Sales at the Dior fashion house totaled 570 million euros, or $789.4 million, at the end of September, up 9 percent in reported terms or 13 percent outside of currency effects. The company cited strong sales of women's and men's rtw, and fine jewelry.
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