PARIS — Buoyed by the resilience of its star Louis Vuitton brand, LVMH Moët Hennessy Louis Vuitton is expected to outperform its luxury peers when it reports second-quarter sales this month.
In preview reports published this week, luxury analysts estimate that the French group’s sales in the period will have declined about 10 to 13 percent in real terms, but with Louis Vuitton advancing 9 percent. HSBC in Paris pegged sales at $2.81 billion, converted from euros at current exchange. In local currency, the figure is 2.48 billion euros. Stripping out the negative effects of currency, analysts expect like-for-like sales to dip about 1 to 2 percent.
The Vuitton brand, which generates about 65 percent of group profits and more than two-thirds of sales in its fashion and leather-goods division, is said to have been boosted by price increases, store openings, strength in Japan and lusty demand for such products as multicolor monogrammed handbags created in collaboration with Japanese artist Takashi Murakami.
French companies report sales and earnings separately, but analyst Antoine Belge at HSBC went so far as to predict that LVMH would be the only company in the luxury sector likely to report positive earnings growth this year. He said he’s curious to see if management sticks to its target of “tangible” growth in operating profits. “We think management’s main goal for  is to outpace rivals who, according to our estimates, will all see their EBIT decline,” he wrote.
Gucci Group and Compagnie Financière Richemont recently reported steep drops in earnings. Gucci saw its net profits nosedive 96.6 percent to $1.4 million for the quarter ended April 30 on a sales decline of 6.7 percent, as reported. For its fiscal year ending March 31, Richemont’s net profits plummeted 22.3 percent to $758 million on a sales drop of 5.4 percent, as reported.
Still, at a difficult time for the luxury sector, analysts agreed LVMH’s duty-free retail operation, DFS, was hit hard by declines in tourism due to the war in Iraq, the SARS outbreak and economic factors.
Claire Kent, luxury analyst at Morgan Stanley in London, forecasts an organic sales decline of 30 percent at DFS in the second quarter.In her research, J.P. Morgan analyst Melanie Flouquet forecasted the second-quarter to be “relatively weak overall.…LVMH cannot have been immune to SARS and the Iraq war. But we note that this is still a clear outperformance against its peer group, in particular at Louis Vuitton.”
At HSBC, Belge noted that other fashion and leather goods brands, including Fendi, Donna Karan and Celine, are likely to be “a great deal less resilient.” By category, he forecasted a 16 percent sales decline of watches and jewelry in the second quarter and a 2 percent line-for-line drop in perfume and cosmetics.
LVMH is expected to disclose first-half earnings on Sept. 11.
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