Sales growth at LVMH’s fashion and leather good unit, its biggest business, accelerated to 7% in the quarter to Dec. 31 from 3 % in the previous three months, beating analysts’ growth expectations of 4-5%.
The owner of Hennessy cognac and fashion brand Dior said the profitability of Louis Vuitton, the group’s main cash cow, remained unchanged in 2013 and its upmarket repositioning progressed, but it admitted to production constraints.
“We have waiting lists that are getting longer,” Chief Executive Bernard Arnault said on Thursday at the group’s annual results presentation at its Paris headquarters, referring to Louis Vuitton, the luxury brand which generates more than €7 billion in annual sales.
When LVMH published its mid-year figures in July, there was concern about Louis Vuitton losing momentum after having enjoyed stellar growth for years.
Those worries continued to weigh on the group, leading its shares to be among the worst performers in the European luxury goods sector in 2013. Last year, LVMH shares lost 4.5%, while this month they are down 7.6%.
“Fashion and leather and Louis Vuitton growth accelerated which bodes well, but this did not result in margin expansion,” noted Bernstein luxury goods analyst Mario Ortelli.
LVMH’s improving fortunes contrasted with that of Italian rival Tod’s which published disappointing fourth-quarter figures on January 29, helping cement the view that major luxury brands such as Louis Vuitton and Kering’s Gucci were suffering from logo fatigue.
LVMH Finance Director Jean-Jacques Guiony estimated Louis Vuitton sales to Chinese consumers last year, both at home and abroad, rose 5%, well below the 10-20% growth rates the brand enjoyed in the country in previous years.
As Louis Vuitton put brakes on worldwide expansion, the numbers published for the brand are close to what its same-store sales growth would be, as they were previously boosted by shop openings, analysts say. LVMH does not publish same-store sales for any of its brands.
Recurring profit from LVMH’s fashion and leather unit fell 4% to €3.14 billion in 2013, a drop the group blamed on investments in the retail networks and image of brands such as Fendi and Berluti.
Asked about LVMH’s acquisition strategy going forward, Arnault said the group was open to strategic opportunities but was not studying any target at the moment.
LVMH’s annual sales reached €29.15 billion in 2013, roughly in line with forecasts, while profit from recurring operations rose 2% to €6.02 billion, compared with a 13% rise the previous year. The group’s operating margin slipped to 20.7% from 21.1% in 2012.