LVMH enjoys sales increase, and recent acquisition of Dior should push revenues even higher
Louis Vuitton’s perfumes and cosmetics were the stand-outs, with sales growth up 17 per cent, almost doubling expectations. All the conglomerate has to do is somehow sustain that momentum
The luxury party is looking a little bit less inviting these days. But for LVMH, at least, the proceedings are still going strong.
LVMH this week reported organic sales growth that beat expectations in the three months up to September 30.
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Perfumes and cosmetics were the stand-outs, with organic sales growth up 17 per cent in the third quarter. That’s a significant result compared to analysts’ expectations of a 9 per cent increase, helped in part by the launch of Rihanna’s Fenty Beauty range at LVMH’s Sephora chain. But high-margin fashion and leather goods also did well, generating organic growth of 13 per cent, compared with expectations of a 9 per cent expansion. Only wines and spirits undershot, due to supply constraints.
Luxury brands have enjoyed a remarkable change in fortune over the past year as pent-up demand from Chinese consumers reignited appetite for everything from Louis Vuitton handbags to Gucci loafers. But life in luxury land is about to get more challenging.
Sales growth now compares with a period a year ago, when conditions started to recover. That will only become more pronounced over coming months, spelling tougher year-on-year comparisons. Meanwhile, European groups face headwinds owing to the strong euro. LVMH said it experienced a negative currency impact of 5 per cent in the third quarter.
But LVMH’s strong position in fashion, leather goods and beauty should put it in a good position to withstand choppier conditions. Its conglomerate structure offers useful diversification, and can act as an early-warning system for the whole group if one arm detects trouble ahead. And the integration of Christian Dior Couture, which LVMH acquired earlier this year, won’t hurt either.
It’s little wonder that LVMH’s forward price-earnings ratio is close to that of rival Kering, whose Gucci brand is enjoying a remarkable revival, and at a bigger premium to the Bloomberg Intelligence luxury peer group. That valuation is deserved.
LVMH is like one of its popular Neverfull bags: a wardrobe workhorse that’s managed to keep on delivering even as other styles change around it.