LVMH Beats Expectations With 7% Q3 Organic Sales Drop

PARIS LVMH Moët Hennessy Louis Vuitton said its sales trends improved sharply in the third quarter, driven by its key fashion and leather goods division, amid signs of a global upturn in activity, particularly in the U.S. and Asia.

The report did not contain any update on the French luxury conglomerate’s ongoing legal dispute with U.S. jeweler Tiffany & Co. over their soured $16.2 billion merger deal.

LVMH said organic revenues fell by 7 percent in the three months ended Sept. 30, beating market expectations and marking a sharp improvement from the second quarter, when comparable sales fell 38 percent as the coronavirus pandemic forced the closure of stores and factories worldwide and grounded travelers.

The Bloomberg consensus estimate was for a 12 percent drop in the third quarter, with fashion and leather goods seen down 0.9 percent.

Instead, the division recorded a 12 percent jump during the period, fueled by its star brands Louis Vuitton and Dior, which both staged physical shows during Paris Fashion Week. LVMH also singled out the performances of Fendi, Loewe and Celine.

Hennessy cognac was another star performer, especially in the U.S., limiting the sales decline in the wines and spirits division to 3 percent in the third quarter. 

The situation was more complicated in perfumes and cosmetics, down 16 percent despite a steady increase in online sales and a promising start for Fenty’s new skin care line.

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There was a 14 percent decline in sales of watches and jewelry, despite a rebound in China, while selective distribution  — which includes Sephora and DFS, LVMH’s travel-retail business — saw revenues plummet 29 percent as international travel showed no sign of recovery.

Travelers previously accounted for 40 percent of luxury goods purchases in value terms, according to analysts.

LVMH’s revenues totaled 11.95 billion euros in the third quarter, down 10 percent in reported terms versus the same period last year, with Asia returning to growth. The group confirmed its ambition to strengthen its lead in the global luxury market in 2020. 

Analysts expect LVMH to outperform the rest of the luxury sector. HSBC has maintained its “buy” rating on the stock, and raised the target price to 480 euros. 

“For LVMH’s key profit contributors there is no such thing as a ‘new normal’ because of COVID-19,” HSBC said in a recent research note.

“LVMH’s high margins and healthy balance sheet should allow the group to increase its leadership positions even further. LVMH has now created a gap versus competitors in size and quality that we believe should prove difficult to close,” HSBC added.

LVMH is the first major luxury group to report third-quarter results. Kering and Hermès International are scheduled to publish their sales on Oct. 22, while Compagnie Financière Richemont is set to present interim results on Nov. 6, and Burberry on Nov. 12.

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