By Miles Socha
with contributions from Jennifer Weil
 on April 12, 2016
Portefeuille Emilie Louis Vuitton

PARIS Discontinued lines at Donna Karan International and Marc Jacobs International contributed to stalled first-quarter sales at LVMH Moët Hennessy Louis Vuitton’s core fashion and leather goods division.

During a conference call Tuesday to discuss results released the evening prior, analysts were told that the division would have posted a gain of 2 percent without the elimination of the DKNY Jeans and DKNYC ranges, plus certain Jacobs products.

Both American firms are restructuring, with Jacobs shelving his Marc by Marc Jacobs contemporary brand and unifying various collections and price segments under one label.

Jean-Jacques Guiony, LVMH’s chief financial officer, acknowledged that the nixed American lines would weigh on the division’s tallies for the balance of the year – and that turnarounds for both companies are not yet in view.

“I don’t think we’ll see a marked improvement until 2017 anyways,” he said, confirming the discontinued lines would wipe 250 million euros, or $284.6 million at current exchange rates, from 2016 tallies.

The executive also warned that steep declines in tourist flows to Europe in the wake of the Brussels and Paris terror attacks would not ease anytime soon.

“I see no improvement as of today,” he said. “We know it’s going to take a few additional months to normalize.”

Vuitton, which operates four freestanding stores in the French capital, plus shop-in-shops at Galeries Lafayette, Printemps and Le Bon Marché, posted double-digit declines in Paris in the first quarter.

“It’s an important place to do business for Vuitton,” Guiony said, noting that tourists account for roughly 35 to 37 percent of the brand’s sales, with some countries in Europe above the 50 percent threshold, but some areas in the U.S. and Japan dependent on tourists for less than 10 percent of sales.

Analysts pelted Guiony with questions about Vuitton’s performance, given that the flagship brand accounts for an estimated 50 percent of group profits, and is considered a bellwether for the industry.

Shares in many luxury goods firms sank in early trading on Tuesday, with LVMH ending the day up 1.5 percent to close at 148.30 euros, or $169.06 at current exchange, on the Paris Bourse.

Guiony trumpeted the “consistent outperformance of small leather goods” at Vuitton, which offers a “range of affordable products with high attractiveness.”

He hastened to add that affordability is relative: “Keep in mind, the price of a wallet at Vuitton can get you a handbag at some other brands.”

Céline’s “good momentum” was also bolstered by small leather goods and shoes, two segments “driven by successful development,” according to Chris Hollis, LVMH’s director of financial communications.

Reflecting a volatile backdrop, with Hong Kong and Macau mired in weak demand, and a rising yen tempering Chinese tourist flows, LVMH said organic growth sank 2 percent in Asia in the first quarter, while the U.S. and Japan each reported a 6 percent gain and Europe logged a 7 percent uptick.

Group sales rose 3.6 percent in the three months ended March 31 to 8.62 billion euros, or $9.51 billion at average exchange rates. Stripping out the impact of currency fluctuations, the gain stood at 4 percent, as reported.

The numbers missed consensus expectations and reinforced that the luxury sector is lodged in a period of muted growth.

Separately on Tuesday, Christian Dior SA, the holding company for LVMH and Christian Dior Couture, released results for its fiscal third quarter and the nine-month period.

Revenues at Christian Dior Couture declined 1 percent in its fiscal third quarter but remained stable on an organic basis, despite lower tourist footfall in Paris and some Asian countries, the company said.

Sales at the French fashion house tallied 429 million euros, or $473.2 million, in the three months ended March 31.

For the first nine months of its current fiscal year, revenues at Christian Dior Couture climbed 8 percent at actual exchange rates and 3 percent at constant group structure and exchange rates to 1.39 billion euros, or $1.53 billion.

Results for the Dior fashion house, known as Christian Dior Couture, were published Tuesday after the Paris Bourse closed as part of a financial release from Christian Dior SA, parent of luxury giant LVMH Moët Hennessy Louis Vuitton.

As reported, Christian Dior Couture closed out 2015 with revenues of 1.87 billion euros, or $2.08 billion, reflecting a gain of 17.1 percent at actual exchange rates and 7 percent at constant rates.

Dior had signaled consumer enthusiasm for the modernist women’s wear of Raf Simons, who exited as Dior’s couturier last October. The spring 2016 collection was his last, and Dior is relying on an in-house team while it plots the appointment of a new creative director for its women’s collections.

Dior’s team, headed by studio directors Serge Ruffieux and Lucie Meier, designed the spring 2016 couture, pre-fall and fall 2016 collections and are on deck to design the cruise collections, scheduled for a May 31 showing at Blenheim Palace outside London.

 

 

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