July 24, 2019 / 4:06 PM / 4 months ago

Vuitton, Moncler set high bar for luxury goods peers

PARIS/MILAN (Reuters) - Jacket maker Moncler (MONC.MI) joined Louis Vuitton owner LVMH (LVMH.PA) on Wednesday in reporting a pick up in sales growth in the second quarter, as the luxury firms capitalized on strong Chinese demand and investments in marketing and new designs.

FILE PHOTO: A woman with a Louis Vuitton-branded shopping bag looks towards the entrance of a branch store by LVMH Moet Hennessy Louis Vuitton in Vienna, Austria October 4, 2018. REUTERS/Lisi Niesner

The industry’s top players are riding high on demand for branded goods across Asia and particularly in mainland China, in spite of a Beijing-Washington trade war that could ultimately weigh on consumer sentiment.

“With Chinese customers, there was a noticeable improvement between the first quarter and the second quarter,” LVMH’s Financial Director Jean-Jacques Guiony told analysts.

That benign backdrop has so far boosted sales at fashion labels in turnaround mode like Britain’s Burberry (BRBY.L) as well as sector stalwarts such as Birkin bag maker Hermes (HRMS.PA) in the April to June period.

Kering (PRTP.PA) and its Gucci brand, due to report first-half earnings on Thursday, should benefit too.

But Moncler and LVMH - two of the top luxury performers on the stock market so far this year - also owe their momentum to attempts to attract young shoppers with novel marketing techniques, investments in e-commerce and a shake-up in their products and designs.

Within Paris-based LVMH, the world’s biggest luxury conglomerate, Vuitton is betting on temporary pop-up stores to spike consumer interest and has turned to DJ-turned-designer Virgil Abloh to grow its menswear lines.

Its Christian Dior brand, while still estimated to be less than a third of Vuitton’s size, was also one of the standouts of the second quarter, with sales growth exceeding the 20% of the broader fashion and leather goods unit, according to Guiony.

Overall, LVMH, whose other labels include champagne maker Moet & Chandon, said second quarter sales across the group rose 15% to 12.5 billion euros ($13.9 billion) euros, up 12% at stable exchange rates and a comparable number of stores.

Analysts had expected like-for-like sales growth of around 10%, following 11% in the first quarter.

At the end of June, operating margins were a touch below forecasts, however, at 21.1%, in part due the step-up in spending on advertising and its brands.

RIGHT DIRECTION?

Moncler, known for its wintry down coats, has tried to jazz up its ranges with special edition jackets from a roster of famous designers, and has stepped away from traditional catwalks shows to host edgier events in its stores.

Its sales growth accelerated further in the second quarter, with the firm posting an 18% revenue increase at constant exchange rates, after 14% in the first quarter.

“We have evidence we’re moving in the right direction,” CEO Remo Ruffini told analysts. Chief Operating Officer Robert Eggs said the buoyant sales trend had extended into July.

Other brands trying to revive more sluggish sales are also experimenting with similar models and now making a push in social media marketing, including Italian shoemaker Tod’s (TOD.MI) and fashion house Prada (1913.HK).

Both LVMH and Moncler said sales had bounced back in France in the second quarter, in another potential boost for peers, helped by a decline in street protests that had hurt business at the start of the year and put off tourists.

“This is not only a Chinese show,” Guiony said.

Reporting by Sarah White and Pascale Denis; Editing by Leigh Thomas and Mark Potter

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