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UPDATE 1-Louis Vuitton sales slow down in Europe, China
April 16, 2013 / 6:51 PM / in 5 years

UPDATE 1-Louis Vuitton sales slow down in Europe, China

* Louis Vuitton demand down in Europe, China

* Weak yen discourages Japanese spending abroad

* Local demand trends in southern Europe still negative (Adds background, CFO, analyst comments)

By Astrid Wendlandt

PARIS, April 16 (Reuters) - Louis Vuitton sales in Europe have been hit by a drop in demand, particularly from Asian tourists, while China has been sluggish with no sign of improvement, its parent LVMH said on Tuesday.

“At this point in time, we miss demand from the Asian part of the world,” LVMH Chief Financial Officer Jean-Jacques Guiony said about Louis Vuitton’s performance in a conference call with analysts and investors on LVMH’s first-quarter sales.

LVMH on Monday had reported the lowest quarterly sales growth since 2009 at its fashion and leather division, dominated by Louis Vuitton, the world’s biggest luxury brand by sales.

The French company’s caution about China and Asia in general fits with the experience of other luxury goods companies such as Richemont that have pointed to a slowdown in the Asian market, a big growth driver for sales.

LVMH, the world’s No.1 luxury goods group, said demand in China in the past 9-10 months had been “flattish,” due to a weakening in economic growth and a government crackdown on gifts for favours. Price increases in Europe made shopping in Paris and Milan less attractive for tourists from Asia.

If, on average, Louis Vuitton prices were about 45 percent higher in Beijing than in Paris, with recent price increases in Europe, the difference was now about 30 percent, Guiony said.

“It is less interesting to go outside China than it used to be,” he said of Chinese tourists shopping in Europe.

“Also, (China‘s) economic growth is not what is used to be ... And the change in leadership has had some consequences in terms of gifting,” Guiony said.

He said traffic was down in most shopping malls in China.

Guiony said the yen’s weakness discouraged the Japanese from spending money abroad but had boosted sales domestically. He estimated that Japanese travellers overall spent 40 percent less on Louis Vuitton products in the first quarter than during the same period last year.

He said that half of Louis Vuitton’s business was tied to Asia “directly or indirectly.”

Looking at Europe, Guiony said trading was stronger in the north than in the south, particularly in Italy and Spain, where the company was still registering negative figures for local demand.


LVMH said earlier this year it had put the brakes on Louis Vuitton’s global expansion and was going to focus on developing more leather upmarket products - as Gucci did three to four years ago.

Guiony said investors could not expect improvements in margins at the group’s fashion and leather division as advertising and other costs would continue to weigh on results.

“According to Guiony’s comments, sounds like luxury goods demand in Europe and China will not improve in the next quarter,” said London-based Bernstein analyst Mario Ortelli.

LVMH shares, which were down nearly 3 percent before the group’s conference call, closed almost 4 percent lower, pulling down other luxury stocks such as PPR, Richemont and Swatch.

LVMH, which also owns Hennessy cognac and champagne brand Moet & Chandon, reported a revenue rise of 3 percent at its fashion and leather unit in the first quarter, below the 5 percent expected on average by analysts.

Some analysts estimated this implied growth of about 2-3 percent for the Louis Vuitton brand, whose more than 7 billion euros in annual revenue, makes up more than 70 percent of the division’s turnover and yields the bulk of group profits.

But Guiony said the brand’s growth was “not materially different” than the average for the division.

LVMH’s total like-for-like sales growth in Europe in the first quarter was zero while it was 7 percent in the United States, excluding Hawaii, 12 percent in Japan and 12 percent in Asia, excluding Japan.

Reporting by Astrid Wendlandt; Editing by James Regan and Jane Merriman

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