LVMH sales soared as Chinese shoppers bounced back from the world’s strictest lockdowns and splashed out on luxury handbags and jewelry. The shares rose to a record.
(Bloomberg) — LVMH sales soared as Chinese shoppers bounced back from the world’s strictest lockdowns and splashed out on luxury handbags and jewelry. The shares rose to a record.
Organic sales at the group’s biggest unit, which sells fashion and leather goods, rose 18% in the first quarter, LVMH said late Wednesday. That’s almost twice the gain that analysts were expecting from Europe’s most valuable company.
The division’s growth in China came in at a double-digit percentage, LVMH Chief Financial Officer Jean-Jacques Guiony told analysts on a call.
LVMH is “extremely optimistic” for China in 2023, Guiony said. “Numbers in the first quarter bode well for the rest of the year.” The executive, however, said LVMH is seeing a slowdown in US growth, with cognac demand and sales of leather goods particularly affected.
“There’s a lot to like in these results despite the US,” said Rogerio Fujimori, an analyst at Stifel, describing the first-quarter performance as a “strong start to the year.”
LVMH shares rose as much as 3.7% to a record in early Paris trading, lifting the Louis Vuitton-owner’s market value to about €433 billion ($476 billion). The stock has climbed by more than a quarter this year after the slump in Chinese demand receded and the mainland moved toward living with the coronavirus.
Demand grew in every region in the first three months as shoppers snapped up luxury items, from Christian Dior handbags to Tiffany rings. Japan saw the strongest quarterly growth, rising 34% on an organic basis, followed by a 24% uplift in Europe and a 14% jump in Asia outside Japan.
Although the US grew 8%, Guiony said LVMH had seen a “little bit of slowdown” there for its fashion and leather goods, as well as jewelry and watches.
More notably, demand for its Hennessy cognac was severely hit there as consumers pushed back against price increases, Guiony said. The drinks maker led those hikes following rising input costs for the glass used in the bottles, he explained. Guiony described the cognac market in the US as being “cyclical” historically.
When it comes to further product price increases, Guiony said fewer hikes are likely this year.
“Clearly China is booming and we don’t expect that to fade away any time soon,” Aurelie Husson-Dumoutier, an analyst at HSBC, said in an interview with Bloomberg TV. “If the US consumer doesn’t bounce back very strongly, we still have very very strong prospects from Europe that has been stronger for longer and also China.”
LVMH will reach a milestone when Tiffany’s flagship store in New York City reopens at the end of this month. This shop contributed almost 10% of total Tiffany sales under the previous owners, Guiony told analysts. Its reopening should have a “positive impact” on sales while also benefiting the overall branding and marketing efforts of the US jeweler, he added.
The French luxury conglomerate said its selective retailing unit, which includes Sephora, grew 28%, the strongest overall rate among all the divisions.
What Bloomberg Intelligence Says
“LVMH’s 1Q organic-sales growth of 17% — almost double the pace of consensus (9%) — is a solid start to the year, that’s likely to be an early driver for full-year analyst upgrades into the low-teens range. Success at the company’s biggest division, Fashion & Leather, underpins solid margin headway. Progress at the No. 2 unit, Selective Retail, confirms the international-travel recovery.”
— Deborah Aitken, consumer-products analyst
LVMH Upgrades Likely on 17% Organic Gain, Double Street’s: React
Paris-based LVMH is the first luxury-goods maker to publish first-quarter sales and is generally considered a bellwether for the rest of the industry. Hermès International, the Kelly bag maker, reports quarterly sales April 14.
LVMH’s multibillionaire founder, Bernard Arnault, saw his fortune cross the symbolic $200 billion threshold last week. On Thursday, it stood at $198 billion, according to the Bloomberg Billionaires Index, making Arnault the world’s wealthiest person.
Read More: Bernard Arnault’s Fortune Soars Past $200 Billion for First Time
–With assistance from Anna Edwards, Caroline Connan and Mark Cudmore.
(Updates with shares, analysts comments in 5th, 11th)
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