LVMH leather sales slow

France
Published:  16 October, 2013

LVMH, the world' biggest luxury group, posted an unexpected slowdown in sales growth at its fashion and leather business, which includes the Louis Vuitton, Celine and Dior brands.

The Paris-based group said growth at its biggest and most-watched division was 4% on a like-for-like basis in the nine months to September 30, against 5% in the first half.

Analysts estimated the division's organic sales growth slowed to 2% in the third quarter from 7% in the second and 3% in the first. LVMH did not publish this figure on October 15.

Louis Vuitton, the world's biggest luxury brand in terms of sales, is paying the price for its shift upmarket, which some analysts expected would lead to short-term losses in sales.

"LVMH management always said the upmarket repositioning of the Louis Vuitton brand would take 18 months, but given the easier basis of comparison, these figures are disappointing," said Antoine Belge, a luxury goods analyst at HSBC.

Many analysts had expected the division's sales growth to remain at a level of at least 7% in the third quarter, with some expecting growth as high as 9%.

"The stock should react negatively to the bad numbers in Fashion & Leather," one Paris-based trader said. "Even if we do not know the performance of Louis Vuitton specifically, it should not be pleasing."

Louis Vuitton is undergoing its most significant leadership change in more than two decades, currently parting with long-standing designer Marc Jacobs and reported to be in complex talks with Nicholas Ghesquiere, formerly at Balenciaga, to replace him.

Last year, Yves Carcelle, who headed Louis Vuitton for more than 20 years, was replaced by Michael Burke, an LVMH veteran who previously headed Bulgari. This year, Delphine Arnault, daughter of LVMH founder and boss Bernard Arnault and Dior's former deputy Managing Director, became Louis Vuitton's No. 2.

Luxury peer Burberry announced the surprise departure of its CEO Angela Ahrendts on October 15, to be replaced by the brand's designer, regarded by investors as an untested operational manager, sending shares of the UK brand lower.

Burberry published a 17% rise in retail revenue at constant currencies for the first half to September 30 and same-store sales growth of 13%, which some analysts described as one of the best performances in the industry so far, however.

Overall, LVMH's turnover in the third quarter rose 8% like-for-like to 7.02 billion ($9.48 billion) in line with the previous six months.

Rival Kering publishes third-quarter numbers on October 24.

Source: Reuters

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