UPDATE 2-Forecast-beating LVMH lifts stake in Hermes

Tue Jul 26, 2011 1:58pm EDT

* LVMH raised holding in Hermes to 21.4 pct from 20.2 pct

* LVMH to pay interim dividend of 0.80 euro/share

* H1 profit from recurring ops 2.22 bln eur vs poll 2.1 bln

* H1 sales rise 13 pct

(Adds details)

By Astrid Wendlandt

PARIS, July 26 (Reuters) - LVMH has raised its stake in smaller luxury rival Hermes to 21.4 percent from 20.2 percent, the world's biggest luxury group said on Tuesday as it posted first-half results above forecasts.

The owner of the Louis Vuitton and Kenzo fashion brands, Moet & Chandon champagne and Chaumet jewellery added, however, it did not own any financial instruments, other than those disclosed, which could raise its Hermes holding further.

"In the course of the semester, we increased our shareholding in Hermes," LVMH Finance Director Jean-Jacques Guiony told investors and journalists in a conference call.

LVMH, which took the luxury world by surprise last autumn by announcing it had built a stake in Hermes, has repeatedly said it did not want to make a bid for the maker of Kelly handbags and silk scarves.

But Hermes shares have been climbing relentlessly since May on speculation LVMH could launch a takeover. The stock reached another high on Tuesday of 242 euros, valuing Hermes at 25.4 billion euros ($36.8 billion).

LVMH, the world's biggest luxury group, has always said it would buy shares in the market, while Hermes has been trying to defend itself from a possible hostile bid by setting up a controlling family holding.

LVMH, which has long courted Hermes, acquired Roman jeweller Bulgari this year and a small Swiss watch manufacturer to boost its exposure to the fast-growing watch and jewellery markets.

Its strongest growth in the first half was produced by its watch and jewellery division, which saw sales rise 27 percent on a comparable basis.

LVMH's results come after Hermes and Burberry posted forecast-beating figures, providing further evidence the luxury sector is being shielded from global economic concerns.

The luxury goods sector has enjoyed a solid rebound since the 2009 spending slump and has been relatively unaffected by worries about the fragile U.S. recovery and the euro zone's debt management.

LVMH posted a 13 percent rise in revenue to 10.29 billion euros and a 22 percent increase in profit from recurring operations to 2.22 billion in the six months ended June 30.

Based on a Reuters poll of 10 analysts, LVMH was expected to post earnings before interest and tax (EBIT) of 2.1 billion euros on sales of 10.21 billion.

LVMH's fashion and leather goods unit, whose Louis Vuitton brand generates more than half of group profit, posted a 14 percent rise in like-for-like first-half sales, against 13 percent for the first quarter, beating market expectations.

LVMH did not give a forecast for the rest of the year, indicating only that it was approaching the second half "with confidence".

It plans to pay an interim dividend to shareholders of 0.8 euros a share on Dec. 2.

PPR , another LVMH rival which owns several luxury brands including Gucci, Yves Saint Laurent and Balenciaga, is set to report first-half figures on Friday.

($1=.6909 Euro) (Editing by James Regan and David Hulmes)

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