LVMH's Revenue Shines Amid Weak Global Economic Growth
February 02 2016 - 4:10PM
Dow Jones News
By Jason Chow
PARIS-- LVMH Moët Hennessy Louis Vuitton SE's fourth-quarter
revenue rose 12% as the French luxury conglomerate showed signs of
resilience amid weak global economic growth and the Nov. 13
terrorist attack in Paris that curbed tourist flows to the shopping
hub.
The firm, which rang in EUR10.38 billion ($11.3 billion) in
sales during the last three months of 2015, was also optimistic
that it would continue to grow despite the unsteady economic
outlook and a major downturn in global stock markets. The company's
overall organic revenue growth, which strips out the effects of
currency, grew 5% in the fourth quarter.
Chief Executive Bernard Arnault said fears of a slowdown in
spending among Chinese consumers, a demographic that industry
experts estimate makes up over one-third of overall global luxury
purchases, were overblown.
"Analysts underestimate the Chinese economy," he said. "The
fundamentals are good. Household spending is still increasing, and
that's important to us."
LVMH, which owns a multitude of brands including flagship
fashion label Louis Vuitton, champagne house Moët & Chandon and
cognac label Hennessy, said its full-year 2015 profit fell 37% to
EUR3.57 billion. The drop was expected as the 2014 net income
figure was boosted by a sale of its stake in smaller luxury rival
Hermès International SA.
Removing the effect of the sale, full-year profit grew 20% as a
low euro and strong tourist spending boosted sales of its fashion
brands.
LVMH is often regarded as a bellwether for the entire luxury
sector as its portfolio includes brands that span fashion,
accessories, liquor, jewelry and watches as well as the DFS
duty-free chain and the Sephora cosmetics label. The results show
that LVMH was better able to weather the many challenges facing the
industry at the end of the year: The effect of terror attacks and
threats and slowing economic growth in emerging markets.
The group also benefits from the drop in the euro's exchange
rate against major currencies, which helps in two ways: Sales
abroad translate favorably when converted into euros, while the low
currency attracts tourist shoppers to splurge in Europe. Chinese
tourists, in particular, were driven to shop in Europe for most of
2015, taking advantage of the exchange rate.
That tourist flow was abruptly interrupted as international
visitors canceled their trips to Europe in the wake of the November
terrorist attack in Paris that killed 130 people and injured
hundreds more in a brutal onslaught on restaurants, a soccer
stadium and a concert venue.
Fourth-quarter organic sales in Europe grew at 6% in the fourth
quarter, slower than the 12% rise over the first nine months of the
year. The attacks hurt sales during the quarter, but Mr. Arnault
said revenue among Paris stores have "progressively" returned and
currently stand "about 4% to 5% lower than normal."
Sales in Japan remained strong in the fourth quarter, as the
country benefited from a strong flow of Chinese tourist shoppers.
Revenue rose 13% in the fourth quarter while sales in the rest of
Asia declined 2% in the quarter.
Mr. Arnault said sales in Hong Kong, a former favored shopping
hub for mainland Chinese consumers, remained depressed as the
region was hit by a negative effect on currency and a political
climate that discouraged visitors from mainland China. Hong Kong
has imposed new visa restrictions to restrict the number of
visitors from China, a reaction to local concerns that the city was
becoming overcrowded with tourists and shoppers from the
mainland.
"Hong Kong is cyclical," he said. "It has its highs and lows.
Now, it's at a low point."
Organic growth of sales at the firm's Fashion and Leather Goods
division, which includes juggernaut Louis Vuitton was at 3% $3.5
billion during the fourth quarter. Though the division trailed
other business lines--the Wines and Spirits division rose 4%
organically in the fourth quarter, for example--Mr. Arnault said
that sales were particularly strong at Louis Vuitton, which posted
record sales in December.
Under creative director Nicolas Ghesquière, who was appointed
more than two years ago, Louis Vuitton has moved to burnish its
reputation as one of the most prestigious brands and revive
sales.
Fourth-quarter organic sales growth in the U.S. was at 5%,
slower than the annual 9% increase for the entire year. LVMH said
sales of cognac were particularly strong.
The U.S. market is responsible for about a quarter of the
group's total revenue.
LVMH said it would increase its divided by 11% to EUR3.55 a
share.
Write to Jason Chow at jason.chow@wsj.com
(END) Dow Jones Newswires
February 02, 2016 16:55 ET (21:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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