LVMH Proud to Disappoint Bears as Quarterly Sales Beat Estimates
October 18, 2011, 12:18 PM EDTBy Andrew Roberts
Oct. 18 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, said it was “proud” to disappoint market bears and remains confident for the rest of 2011 after third-quarter sales beat analysts’ estimates.
“In the current environment, most people are looking for reasons to be worried rather than to be optimistic,” Finance Director Jean-Jacques Guiony said today on a conference call. “We are very proud obviously to disappoint pessimistics as our businesses, by and large, continue to operate in the same environment as they have since the beginning of the year.”
Revenue rose 18 percent from a year earlier to 6.01 billion euros ($8.23 billion), the Paris-based maker of Celine handbags and TAG Heuer watches said in a statement. That surpassed the 5.85 billion-euro average of seven analysts’ estimates compiled by Bloomberg. Excluding currency swings and acquisitions, sales in the quarter advanced 15 percent.
Growth in sales of luxury goods may weaken in 2012 from this year’s 10 percent gain as Europe’s sovereign debt crisis weighs on purchases of expensive handbags and other items in the region, Bain & Co. said yesterday. LVMH has seen some signs of weakness, notably in southern Europe, though October is in line with the first nine months of the year and the company has no reason to believe the environment will change, Guiony said.
“Our future view is as good as yesterday’s sales,” the finance director said. “Yet the current strengths of, more or less, all our businesses and all geographies nourishes our confidence for the future and our ability to make further advances on the luxury market.”
Share Performance
LVMH shares rose 0.4 percent to 114 euros in Paris, paring this year’s decline to 7.4 percent and valuing the company at 57.9 billion euros.
LVMH has asked managers to prepare a “Plan B” for 2012 in case of a downturn, Guiony said. Nine-month sales climbed 15 percent to 16.3 billion euros, led by watches and jewelry, selective retailing, and fashion and leather, the company said.
The acceleration in fashion and leather-goods sales in the third quarter “notably demonstrates that capacity constraints are no longer an issue” at Louis Vuitton, Antoine Belge, an analyst at HSBC who has a “neutral” recommendation on the stock, said in a note. Vuitton opened additional production facilities after inventory shortages in the first half.
On a local-currency basis, sales gained 27 percent in Asia, 18 percent in the U.S. excluding Hawaii, and 7 percent in Europe in the nine months through September, LVMH said. Revenue fell 3 percent in Japan in the period, though sales grew 3 percent in the country in the third quarter.
Growth in China
“We see no signs of slowing down in China,” Guiony said, adding that Asia, excluding Japan, continues to grow its share of total revenue.
Watch and jewelry sales growth slowed in Europe in the third quarter, hurt by “lackluster” demand in Italy and Spain and the Swiss franc’s appreciation against the euro, the executive said. Perfume and cosmetics sales fell about 1 percent in Europe, he said.
Champagne volumes were “flat” in the period, negatively affected by a shortage of Veuve Clicquot in the U.S. and the lackluster performance of Mercier in Europe, where some accounts closed, Guiony said.
LVMH agreed to buy Bulgari SpA in March and has built up a stake in Hermes International SCA to benefit from surging demand for $3,200 white gold and diamond earrings and $7,500 Birkin bags. LVMH’s shareholding in Hermes isn’t materially different from the 21.4 percent stake it declared in July, Guiony said.
--Editors: David Risser, Paul Jarvis
To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net
