LVMH reassures on China as Vuitton handbags boost sales

LVMH reassures on China as Vuitton handbags boost sales

By Sarah White

PARIS (Reuters) - LVMH struck a "cautiously" confident tone for the year ahead on Tuesday after fourth-quarter sales held up despite fears of a China slowdown, and growth picked up at its Louis Vuitton megabrand.

Luxury goods companies have been hit by worries about signs of slowing demand in China, their biggest market, as consumer and business confidence sours in the country and the Sino-U.S. trade war drags on.

But LVMH said demand in China had improved in the last three months of 2018, and it posted better-than-expected sales growth for its leather goods and fashion division.

"We are confident for 2019, which got off to a good start, but we're not in control of the global environment," billionaire LVMH boss Bernard Arnault told a news conference.

Arnault also revealed that Vuitton's sales were "well over" 10 billion euros in 2018, making it the world's biggest luxury brand ahead of Chanel and Kering's Gucci, which has set that revenue goal for itself.

The conglomerate, which has snapped up rivals worldwide over the decades, is focusing on expanding its brands with big social media marketing investments and new designers. This includes Celine, which it said was "on the right track" to eventually reach 2 billion euros in revenue.

Asked whether LVMH was teaming up with "Umbrella" singer Rihanna to launch a fashion label, Arnault said "nothing was firm."

LVMH, also home to fashion brand Givenchy and champagne label Moet & Chandon, reported revenues of 13.7 billion euros ($15.64 billion) for the October-December period.

Sales grew 9 percent on a like-for-like basis - which strips out currency swings and acquisitions - compared to 10 percent in the third quarter, and in line with forecasts.

STOCKPILING FOR BREXIT

LVMH and its rivals have relied on growing demand from young, middle class Chinese shoppers to lift sales and are betting that this trend will last even if the boom of the past two years eases.

Spending patterns are shifting, with some Chinese starting to buy more luxury goods at home rather than overseas due to import tax cuts and a falling yuan, though that has also raised concerns that shopping capitals like Hong Kong will lose out.

Other challenges include Britain's possible exit from the European Union without a negotiated deal.

LVMH said Britain accounted for only 4 percent of its sales, but added it had stockpiled four months' worth of wine and spirits inventory in the country to prepare "for the worst case scenario."

For the full year, LVMH's operating income rose 21 percent to a record 10 billion euros, and the cash-rich group hiked its dividend on 2018 earnings to 6 euros per share, from 5 euros in 2017.

"A good start to 2019 and (the) proposed dividend increase of 20 percent should reassure," analysts at RBC Capital Markets said in a note. LVMH shares are up over 2 percent this year, but down some 16 percent since a peak last May.

($1 = 0.8760 euros)

(Additional reporting by Dominique Vidalon and Pascale Denis; Editing by Jane Merriman and Richard Chang)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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Updated Date: Jan 30, 2019 04:05:57 IST

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