October 9, 2018 / 4:21 PM / 7 days ago

Vuitton propels LVMH growth in boost for luxury sector

PARIS (Reuters) - A standout performance by LVMH’s (LVMH.PA) fashion and handbags business boosted third-quarter sales growth at the luxury goods company, providing an encouraging sign for an industry gripped by fears of a slowdown in China.

The group, which has brands ranging from Louis Vuitton and couture label Givenchy to cognac maker Hennessy, has benefited along with a handful of rivals such as Gucci-owner Kering (PRTP.PA) from rebounding demand among Chinese customers in the past two years.

Concerns over a trade war between Beijing and Washington and a falling yuan has rattled luxury goods stocks in the past few weeks, though there is little sign of waning spending among young and digital-savvy Chinese shoppers with a taste for branded goods.

(Graphic: Luxury companies ride sector recovery - reut.rs/2yra7oZ)

LVMH on Tuesday produced a 14 percent rise in comparable sales in the division covering sales of high-margin handbags and fashion. That beat the 12 percent increase expected in an Inquiry Financial poll of analysts. This follows sales growth of 13 percent in the previous quarter, which the company said at the time was unfavorably distorted by accounting effects.

Powered by Vuitton, the division is also home to fashion brand Christian Dior, which has been revamping its accessories with the recent relaunch of its 1990s Saddle bag.

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/File Photo

LVMH, the first luxury goods player to report for the three months to Sept. 30, said sales reached 11.4 billion euros ($13.1 billion) in the quarter and were up 10 percent on a comparable basis, in line with forecasts.

“All in all, this was another strong quarter from LVMH,” RBC Capital Markets analyst Rogerio Fujimori said in a note.

Other bright spots included wine and spirits, where revenue growth accelerated from one quarter to the next, though momentum in perfumes and cosmetics slowed, despite the launch of a new Dior fragrance, “Joy”.

The division has been riding high thanks in part to Fenty Beauty, a make-up line created by singer Rihanna.

LVMH, run by billionaire chairman and CEO Bernard Arnault, has been investing in some of its smaller brands to stay ahead of the game as luxury firms compete to attract young buyers with a constant thirst for new styles.

The group wants to triple sales at its Celine fashion label, which designer Hedi Slimane has given a rock-and-roll makeover.

Chinese consumers account for about a third of all luxury goods purchases. The industry, buoyed by lofty stock market valuations, is especially sensitive to any hint of trouble in China. LVMH shares, for example, are trading above five-year averages.

Shares fell last week due to unconfirmed rumors of a crackdown on high-end wares by Chinese customs officials.

Reporting by Sarah White and Pascale Denis; Editing by David Goodman and Jane Merriman

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