PARIS – Shares in LVMH Moët Hennessy Louis Vuitton shot up 4.5 percent on Tuesday after the French luxury player said a rebound in Asia and a surge at Louis Vuitton underpinned its strong third-quarter results.
Elaborating on the French group’s 6 percent sales gain during a conference call, chief financial officer Jean-Jacques Guiony said sales in Mainland China accelerated to the midteens, versus a midsingle-digit percentage in the first half.
“More or less all businesses contributed to this improvement,” Guiony said, also citing improvements in Hong Kong from midteen negative to midsingle-digit negative.
By region, organic revenues jumped 10 percent in Asia excluding Japan versus flat sales there in the first half. Europe and the United States each logged a 6 percent improvement, while Japan declined 9 percent from flat growth in the first half due to a strong yen and import restrictions for Chinese tourists.
Guiony trumpeted a “very solid business” for Vuitton in the U.S. and other regions, with the cash-cow brand largely mirroring the 5 percent gain logged in the fashion and leather goods business overall in the three months to Sept. 30.
The increase in that division, which spans such brands as Fendi, Givenchy and Kenzo, would have stood at around 7 percent if one removes the impact of discontinued lines at Donna Karan International, which LVMH is selling to G-III Apparel Group, he noted.
“The French customer was pretty strong in Q3,” excepting tourists, Guiony said, also citing robust Vuitton sales in Italy, Germany and the U.K., the latter despite twin 5 percent price increases pre- and post-Brexit decision. “France is still negative, but not as negative as H1.”
He acknowledged that Vuitton’s foray into perfume — sold in select Vuitton boutiques since early September — represents a “small business. But as far as image and traffic generation, the fragrance business is doing exactly what we had in mind.”
Analysts were also curious about LVMH’s acquisition last week of a majority stake in luggage maker Rimowa, which values the German firm at 640 million euros, or $719 million.
Guiony said Rimowa would remain primarily a wholesale-driven business, with select retail expansion in major cities “to enhance the image.”
LVMH’s long-term objective is to increase Rimowa’s operating margins to 20 percent. “We think this is achievable,” Guiony said. “A global group like ours can bring a lot to the business… If there are intelligent synergies to be made, why not?”
Meanwhile, he brushed off suggestions the purchase represented any shift in the group’s policy on mergers and acquisitions.
“We are opportunistic people,” he said. “This is not significant of any future trend of more or less M&A.”
Asked about additional forays into e-commerce, Guiony described a measured approach.
“We believe very much in the digital content of the shopping experience,” he said, also lauding the effectiveness of “e-marketing” on social media channels.
As for pure e-commerce, he said, “we don’t expect this to become a very big channel. Otherwise it would have happened already.”
Asked by one analyst if LVMH would consider selling on Amazon, which is challenging traditional department stores in the U.S., Guiony said the existing business model “does not fit with our brands” and “doesn’t fit with luxury.”
He declined to give specifics on the Marc Jacobs business, which is “still under a reinvention phase. The business was down again in Q3 and it will be again in Q4.”
Third-quarter sales at LVMH totaled 9.12 billion euros, or $10.21 billion, and outstripped analysts’ projections, as reported. The perfumes and cosmetics division grew 10 percent, while watches and jewelry were up 2 percent and the selective retailing division, 8 percent. Wines and spirits advanced 4 percent, dented by the discontinuation of a distribution agreement for Grand Marnier.