PARIS — Sales at LVMH Moët Hennessy Louis Vuitton rose 10 percent in the first quarter propelled by fast growth in fashion and leather goods as the luxury goods giant continued its upward trajectory, exceeding expectations.
Sales were 10.85 billion, up 13 percent on an organic basis, matching the growth rate for 2017, with a “remarkable” performance from its star brand Louis Vuitton, the company said.
Referring to a “buoyant” environment at the start of the year, despite unfavorable exchange rates and geopolitical uncertainty, the luxury goods behemoth said it would continue to focus on developing its brands while keeping control of costs.
Stopping short of issuing an annual financial target, LVMH said it would lean on its workforce, the diversity of its portfolio and geographic mix of revenue sources to “reinforce, once again in 2018, its global leadership position in luxury goods.”
The industry bellwether’s quarterly sales figures come before other luxury rivals Kering, due to report on April 24 and Hermès on May 3. Compagnie Financière Richemont reports annual results on May 18.
“Chinese consumer confidence is at a peak,” in the first quarter of this year, driving growth of both hard and soft luxury, noted Luca Scola, an analyst with Exane BNP Paribas, in a client note.
“This is creating a buoyant environment for the luxury sector, especially for brands capable of tapping into younger Chinese consumers demand,” Solca added.
Sales were driven by its largest business, fashion and leather goods, home to the Vuitton brand, which clocked 16 percent growth on an organic basis, to reach 4.27 billion euros.
Analysts said the performance beat expectations.
“LVMH had a strong start to the year,” said Rogerio Fujimori of RBC Europe Ltd., noting organic sales rate from the fashion and leather goods handily beat consensus expectations of 9 percent organic growth.
The analyst said that for the group as a whole, the over-performance in organic sales offset a stronger foreign exchange rate headwind than expected, likely leading to a series of upgrades on earnings forecasts.
“This material beat by Louis Vuitton should be enough to keep the upward momentum of the shares, we believe,” added Fujimori, who has an ‘outperform’ rating for LVMH.
“Very tough comparatives were not an issue as feared,” Fujimori noted, referring to the fashion and leather goods business. The division, which has recently undergone a series of management reshuffles, recruited one of the industry’s foremost trendsetting designers, Hedi Slimane, to push Céline into men’s wear with the aim of doubling or even tripling the label’s sales over the next five years.
At Louis Vuitton, new men’s wear designer Virgil Abloh, will push the brand even further into the red-hot streetwear scene. Following Vuitton’s high profile collaboration with Supreme last year, another LVMH label, the German suitcase maker Rimowa, is issuing a series of Supreme suitcases running, for sale in New York, Brooklyn, Los Angeles, Paris and online on April 12.
The fastest growth came from the smallest division, watches and jewelry, which increased 20 percent on an organic basis to 959 million euros as Bulgari gained market share. In its release, LVMH also noted new timepieces from its watch brands, Hublot, Tag Heuer and Zenith as well as Bulgari’s ultra slim Octo Finissimo Automatic Tourbillon, were “very well received” at the industry trade show Baselworld last month.
Selective retailing, which includes the beauty retailer Sephora and duty-free stores DFS, posted a 9 percent organic sales rise, despite the ending of concession contract at the Hong Kong International Airport. The group said online sales grew rapidly around the world for Sephora, which is gaining market share.
The perfumes and cosmetics division clocked 17 percent growth on an organic basis, to 1.5 billion euros, with swift growth from its Christian Dior brand, including the perfumes J’Adore, Miss Dior and Sauvage. The company singled out Fenty Beauty by Rihanna as an “exceptional success.”
Wine and spirits division posted 1.2 billion in sales, a 10 percent rise in organic terms, as business in the U.S. and China continued along the same lines as in the second half of 2017, according to LVMH.