PARIS — Don’t count out America yet — especially its taste for luxury.
This story first appeared in the April 17, 2008 issue of WWD. Subscribe Today.
Elaborating on its first-quarter results, LVMH Moët Hennessy Louis Vuitton said U.S. sales of fashion and leather goods leapt 18 percent in dollars, with no evidence of trading down or any change in its favorable momentum.
“For the time being, we see no signs of slowing down in our retail businesses,” Jean-Jacques Guiony, Louis Vuitton’s chief finance officer, said during a conference call on Wednesday. “We are pretty optimistic.”
Indeed, dollar sales in its selective retailing division, which mainly comprises its DFS and Sephora banners, rocketed 20 percent in the three months ended March 31, while perfumes and cosmetics advanced 12 percent. Like-for-like sales at Sephora jumped 11 percent, he noted.
Overall, U.S. sales excluding Hawaii gained 10 percent in dollars in the quarter, held back mainly by weak demand for wines and spirits, which declined 15 percent in the period due mainly to price increases and steep cuts in inventory levels by retailers.
Sounding relaxed and confident, Guiony said the strong results underscored the French luxury giant’s “resilience to a challenging environment.” What’s more, he suggested that its cash-cow Louis Vuitton brand would continue to “outperform” the market since “customers favor established brands in tougher times.”
While analysts looked for dents in Vuitton’s armor, Guiony fessed up to none. He said all regions performed “pretty well,” as did all product categories, and, “We haven’t seen any trading down in terms of mix of sales.” He also noted that the impressive U.S. gains came despite a 5 percent price hike at the end of January.
However, Guiony cautioned analysts not to “overestimate the impact” of the leather goods designed by Marc Jacobs in collaboration with American artist Richard Prince, suggesting it may not end up a long-running blockbuster like its hookup with Japanese artist Takashi Murakami, whose multicolored monogram leather goods have generated hundreds of millions of dollars in sales. “It’s not a major thing,” Guiony said of the Prince venture when asked if it had goosed Vuitton sales in Japan. Instead, he described an important impact in terms of publicity, yet “not particularly significant in overall sales.”
LVMH cited “strong momentum” at other fashion and leather goods brands, including Fendi, Marc Jacobs, Loewe, Givenchy, Celine and Pucci, also noting good growth for the Donna Karan Collection and DKNY lines.
As reported Wednesday, sales at LVMH jumped 12 percent at constant exchange to 4 billion euros, or $5.99 billion. Accounting for the adverse currency environment, sales rose 5 percent.
During the call, Guiony also trumpeted strong momentum in Asia — excepting Japan — and a “robust” Europe. Asian sales rose 12 percent, with particular strength in China for cognac, Louis Vuitton products, Dior perfumes and duty free products. In Europe, sales were up 8 percent with watches and jewelry surging by 19 percent.
Japan, however, remains a disappointment, where sales in the quarter slipped 4 percent in yen. “Obviously, it’s below our expectations,” he said. “It’s clear the Japanese market is a bit tough. We don’t expect an upturn.”
However, he stopped short of a doom scenario, saying LVMH hopes to match its 2007 sales in the island nation. “We are not particularly worried for the time being,” Guiony said, noting that a 19 percent price hike for Dom Pérignon Champagne was among factors dampening demand in Japan for its premium wines and spirits in particular.
Asked to comment on market speculation that LVMH could use excess cash to buy Roman jeweler Bulgari SpA, or return money to shareholders, Guiony declined to comment, noting that Bulgari is “not for sale, as far as I know. It’s a bit theoretical. We’ll see what kind of opportunities we have.”
Shares in LVMH gained 4 percent Wednesday on the Paris Bourse to close at 69.33 euros, or $109.69.