LVMH sees good times return in Asia as South Korea leads surge in sales

PUBLISHED : Thursday, 08 July, 1999, 12:00am
UPDATED : Thursday, 08 July, 1999, 12:00am

Giant French luxury-goods company Moet Hennessy Louis Vuitton (LVMH) has signalled Asia's long-awaited economic recovery appears to be taking hold.

The company, which had been hit hard by the region's recession, said yesterday that sales in the first half of this year had jumped 15.5 per cent from a year earlier to 3.6 billion euros (about HK$28.92 billion).

LVMH, which owns leather goods-maker Louis Vuitton and Duty Free Shoppers (DFS), said the fastest turnover growth in the period was seen in sales of champagne and wines.

These products surged 33 per cent from a year earlier to 550 million euros.

In Asia, LVMH's sales in South Korea were up a year on year 100 per cent in the half, according to analysts.

Sales in the mainland jumped 60 per cent, while those in Hong Kong rose 47 per cent.

The company also enjoyed strong growth in Indonesia.

'The rise in turnover in the first half allows us to confirm our target of at least 15 per cent growth in operating profit in 1999,' LVMH said.

Dresdner Kleinwort Benson analyst Nathalie Saleur said the surge in LVMH's sales appeared to be driven by the rise in Japanese tourist travel spurred by a stronger yen.

'The strengthening of the yen-dollar rate has had a positive impact on Japanese tourism, which is the main source of [LVMH's] sales volumes,' she said.

'Clearly in places like Hong Kong, Singapore, South Korea, they have seen double-digit increases in the number of Japanese tourists, and that has translated into positive sales growth.' LVMH said in the second quarter, its sales jumped 18 per cent. It said sales improved in all markets.

Analysts said the results showed Louis Vuitton was leading the group's recovery, with 20 per cent growth reported in the first quarter, and 28 per cent in the second.

'We are definitely seeing strength in Asia,' an analyst at a United States investment bank said.

Products such as luxury leather goods and ties would lead the sales revival, while jewellery would lag, the analyst predicted.

'Asia is certainly looking strong for all luxury companies,' he said.

'Japanese tourism is stronger than last year.

'We are not going back to the heyday of 1996 to early 1997, but it will get stronger.' Analysts said the sector's growth appeared strong, but they were still cautious about whether gains could be sustained.

'The recovery has still to be confirmed in other places which are also important shopping areas,' Dresdner's Ms Saleur warned.

Sales in Hawaii and Guam had not picked up yet, 'though the situation does seem to have stabilised', she said.

Moreover, DFS did not perform as well in the first half as other parts of LVMH, indicating the sector's recovery may not be fully under way, analysts said.

'While Louis Vuitton has a presence in Hong Kong and Singapore, DFS has more of a presence in Hawaii and Guam,' Ms Saleur said.

Analysts said the fate of the yen would also weigh heavy on the sector's recovery because of its dependence on Japanese tourists.

'If the yen strengthens again, it is extremely good news for the sector,' Ms Saleur said.

'But if it goes down to 130 yen [against the US dollar], then we will go back to consolidation rather than recovery.' BACK TO THE BUBBLY Luxury-goods giant sees first-half sales jump 15.5 per cent as pointing to firming Asia recovery Sales of champagne and wines surge 33 per cent for sector with fastest growth in turnover South Korea leads gains with 100 per cent jump