Oct 12, 2016
Chinese clients drive Louis Vuitton rally
Oct 12, 2016
In the third quarter, Louis Vuitton recorded an organic growth of over 7%, the rally being driven by its Chinese customers and by robust increases in Europe, allowing the luxury label to compensate for the sales decline in France and Japan.
The trunk-maker, the LVMH group's main profit centre, enjoyed a growth "close to that of the fashion-leather goods division, net of the negative effect of the line discontinuations at Donna Karan," stated on Tuesday Jean-Jacques Guiony, the group's CFO.
He indicated that, excluding the impact of Donna Karan - which the group is about to sell to G-III Apparel - the division's growth was just above 7%.
LVMH took the market by surprise on Monday, publishing third quarter figures which are significantly higher than the forecasts. This has made the luxury goods sector's outlook look brighter, and caused the group's share value to spike up.
Jean-Jacques Guiony stated that expenditure by Chinese clients, worth about one third of Louis Vuitton's sales, has rallied and recorded a double-digit increase, after stagnating in the first six months of the year.
He does not know however whether this growth will be sustained, and is the sign of an underlying trend. "It is very hard to extrapolate trends from a single quarter's figures," he said.
The brand has improved in Europe too, where it also grew by more than 10%, thanks to strong performances in Italy and the UK. Tourists flocked to the latter in particular, to profit from the weak pound.
Conversely, sales have slumped in France, shunned by tourists after the terrorist attacks, and in Japan, neglected by the Chinese because of the rising yen.
"The month of September was this year's first positive month in France," stated Jean-Jacques Guiony, without disclosing anything further on the result.
Price increases have contributed to the label's growth "only very marginally." In the UK, Vuitton has increased prices twice this summer, to compensate for the weak pound.
As for the Vuitton fragrances launched in early September, the CFO stated that in themselves they did not contribute to growth, but have played their role in terms of brand image and footfall generation.
He also forecasted that the operational profit of Rimowa, the German luggage specialist recently acquired by LVMH, would reach 20% in the future, a figure still "very far from the current level of profitability," which is closer to 10%.
After this acquisition, analysts who anticipated a potential buyback of LVMH group shares in the region of €500 million to €1 billion, now regard such operation as unlikely.
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