LVMH sales tick up as US luxury demand offsets hit from Iran war
LVMH Q2 Sales Performance and Market Dynamics
By Dominique Patton
Strong U.S. Demand Drives Growth
PARIS, July 27 (Reuters) - Sales at luxury giant LVMH edged higher in the second quarter as strong demand from affluent U.S. shoppers helped offset weaker spending in Europe, where tourism has been hit by the Iran war.
Sales at the owner of Louis Vuitton, Dior and Moet & Chandon champagne rose 3% when adjusted for currency swings to €19.5 billion ($22.2 billion), broadly in line with analysts' consensus estimate, according to Visible Alpha.
Growth was driven by the U.S., where sales rose 6% after a 3% increase in the first quarter, LVMH said, citing strong demand fuelled by newly created wealth, such as from the AI and technology booms.
Watches & Jewellery Outperforming
The Watches & Jewellery division was LVMH's fastest-growing business, with organic sales up 11%, accelerating from 7% in the previous quarter. Tiffany and Bulgari posted growth in the mid-teens as wealthy shoppers continued to favour jewellery over soft luxury categories.
Executive Commentary
"What you've seen is that despite continued instability in the macro environment, trends improved across all geographies in H1 and where wealth is created, consumer appetite for luxury and for our products in particular is strong," finance chief Cecile Cabanis said on a call with analysts, striking a more confident tone than after more muted first-quarter results.
Fashion and Leather Goods: Slower Growth
FASHION AND LEATHER GROWING MUCH SLOWER THAN HARD LUXURY
The fashion and leather goods division, which generates the bulk of LVMH's operating profit, posted 1% organic growth, mostly thanks to U.S. consumers. That was the segment's first quarterly increase in two years, but fell short of analysts' expectations for a 1.7% rise.
The French group, led by billionaire Bernard Arnault, said the Iran war reduced growth in the division by 1 percentage point, but added that Dior was gaining momentum under new creative director Jonathan Anderson, who beat rival Chanel to design Taylor Swift's wedding dress.
In Europe, sales were flat in the quarter, stabilising after a decline in the first three months of the year as conflict in the Middle East weighed on tourism.
In a rare public comment, Arnault dismissed on Sunday media reports of a bitter succession battle among his five children, insisting his family remains united.
Luxury Brands Intensify U.S. Focus
LUXURY BRANDS FOCUS ON U.S. MARKET
European luxury brands have stepped up their focus on the United States, opening stores and staging fashion events to tap wealth generated by near record-high stock markets.
However, questions remain whether LVMH's relatively modest sales growth is enough reassure investors that the $400 billion luxury sector is decisively emerging from a two-year downturn.
Investor Sentiment and Share Performance
"We wonder if this could be good enough to sustain the share price and get investors to stand up and pay attention," Bernstein analysts said in their first reactions to investors.
LVMH's U.S.-listed shares were down 1.6% at 1704 GMT, having briefly slipped to their lowest since June last year.
Shares in the French group have fallen 28% year to date, making LVMH one of Europe's worst-performing large-cap stocks.
Analyst Reactions
"Net, we view this as a reassuring print particularly on better than expected margins and earnings," RBC analysts said in a note. "However questions will likely be asked around whether (second half) consensus expectations are achievable given increasingly tougher comparative".
Financial Overview and Outlook
For the first half, LVMH's sales rose 2% on an organic basis, but fell 3% on a reported basis to €38.6 billion. Over the same period, profits from current operations fell 4% to €8.7 billion, as currency moves reduced earnings by about €700 million, though the operating margin was broadly stable at 22.5%.
Rivals Kering and Hermes report results on Tuesday and Wednesday respectively.
($1 = 0.8792 euros)
(Reporting by Dominique Patton and Florence Loeve, additional reporting by Lisa Jucca, Editing by Lisa Jucca and Mark Potter)
