Chinese demand helps LVMH bag robust luxury goods sales

LVMH sales in Asia surged 17 per cent last year, and travelling Chinese shoppers lifted other markets. Now, investors are watching carefully to see how long the boom can last for the luxury market's leader, especially as US President Donald Trump's t
LVMH sales in Asia surged 17 per cent last year, and travelling Chinese shoppers lifted other markets. Now, investors are watching carefully to see how long the boom can last for the luxury market's leader, especially as US President Donald Trump's trade moves risk shaking confidence in the industry's biggest client base.PHOTO: REUTERS

PARIS • Luxury conglomerate LVMH said it is planning numerous product launches before the end of the year as it races to stay ahead of fast-growing competitors like Kering's Gucci and closely held Chanel.

Second-quarter sales rose 11 per cent, the Paris-based owner of Louis Vuitton handbags and Sephora cosmetics said in a statement late on Tuesday, beating analysts' expectations.

The world's largest luxury company reported double-digit percentage growth in sectors from fashion to jewellery and cosmetics. The firm's shares rose as much as 2.6 per cent early yesterday in Paris.

LVMH has so far thrived despite the opening rounds of a global trade war, as the Chinese consumer's appetite for French luxury goods surged during the quarter. But because of the threat of higher tariffs and other economic uncertainties, "the current trends cannot realistically be extrapolated to the second half of the year", said the group's chief financial officer Jean-Jacques Guiony on a call.

"Management sounded quite confident, despite ongoing concerns about Chinese demand and tougher comps," Raymond James analyst Hermine de Bentzmann wrote, adding that the result augured well for Kering.

Chinese consumers account for roughly a third of luxury goods purchases, according to consulting firm BCG - and as much as 70 per cent of the sector's growth.

LVMH sales in Asia surged 17 per cent last year, and travelling Chinese shoppers lifted other markets.

Now, investors are watching carefully to see how long the boom can last for the luxury market's leader, especially as US President Donald Trump's trade moves risk shaking confidence in the industry's biggest client base. "The threats are there but I don't think they have materialised yet in any way," Mr Guiony said.

Shanghai's CSI 300 stock index has fallen 11 per cent this year, fuelling fears that high-end shoppers could tighten their belts.

China moved to bolster consumption by lowering import duties on many products this month, and luxury brands including Louis Vuitton and Hermes have cut prices to pass the benefit on to consumers.

LVMH said its coming product launches include perfumes from Christian Dior and Givenchy.

The plans come as LVMH's competitors have thrown down the gauntlet in recent months.

Gucci set a mid-term sales target that would rival estimates for Louis Vuitton, long the world's largest luxury brand with more than €9 billion (S$14 billion) in annual sales. Chanel released its yearly financials for the first time in 108 years - at the same time as Louis Vuitton's most recent fashion show - to reveal that its sales of quilted leather handbags and No. 5 perfume had already bested Louis Vuitton by some measures.

In a bid to keep its edge, LVMH has reshuffled the creative leadership at its biggest fashion brands in recent months.

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A version of this article appeared in the print edition of The Straits Times on July 26, 2018, with the headline 'Chinese demand helps LVMH bag robust luxury goods sales'. Print Edition | Subscribe