Oct 16, 2012
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LVMH Q3 sales point to luxury slowdown

Oct 16, 2012

PARIS - LVMH sounded the latest warning that luxury consumers are tightening their purse strings as it posted a further slowdown in comparable sales growth in the third quarter to 6 percent.

Bernard Arnault. Photo: AFP.

The performance, dented by weaker demand for its fashion, leather goods, watches and jewellery, compared with revenue growth of 8 percent in the second quarter and 12 percent in the first.

The news came as consultancy Bain & Co forecast global luxury sales growth would slow sharply to 5 percent this year from 13 percent in 2011 as Chinese and European consumers cut spending.

While Burberry has warned of tougher market conditions globally and in China in particular, other big groups such as Hermes and Prada have dismissed talk of a major slowdown in the luxury goods market.

LVMH, which owns Moet & Chandon champagne, Hennessy cognac and fashion brands Celine, Fendi and Kenzo, said it remained confident for 2012 "despite an economic slowdown in Europe".

The group is expected to give more details on its outlook during a conference call with analysts on Tuesday at 1300 GMT.

The world's No. 1 luxury group said revenue in the three months to Sept. 30 totalled 6.9 billion euros ($8.93 billion). This compared with the 6.875 billion average of estimates in a Reuters poll of eight analysts, or 7 percent like-for-like growth.

LVMH did not give any details on the performance of Louis Vuitton, the world's biggest luxury brand in terms of sales which accounts for 75 percent of the group's fashion and leather revenue.

Analysts are concerned that Louis Vuitton is losing traction in big markets such as China as consumers opt for more discreet luxury products with no logos and start to favour more niche fashion brands.

LVMH would only say that Louis Vuitton "continued to gain market share around the world" and reported a double-digit percentage rise in nine-month sales on a reported basis.

Analysts estimate the group's fashion and leather goods division saw sales growth slow to 4 percent in the third quarter from 8 percent in the second and 12 percent in the first.

"We believe it is fair to assume that the Louis Vuitton brand itself underperformed this 4 percent divisional average," HSBC analysts said in a note.

LVMH did not publish comparable growth figures for each division.

"For us the disappointments are the watches and fashion and leather goods," one London-based analyst said.
Analysts calculated comparable growth at the group's watch and jewellery unit was about 2 percent, against 9 percent in the second quarter and 17 percent in the first.

LVMH rival PPR, which owns luxury brands Gucci and Yves Saint Laurent, publishes third-quarter figures on Oct. 25. ($1 = 0.7730 euros)

(Reporting by Astrid Wendlandt. Additional reporting by Pascale Denis.)

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