LVMH beats the street setting positive tone for luxury sector
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LVMH beats the street setting positive tone for luxury sector

The world’s largest luxury company, LVMH, reported quarterly earnings this week that demonstrate a positive backdrop for the sector: sales for the first quarter of 2018 rose by 13% on an organic basis, easily beating analysts’ expectations of 8.5%. The biggest driver in this outperformance was continual strong demand from China, but the group’s CEO, Bernard Arnault, thinks that an impressive Ecommerce showing is what will keep LVMH ahead of the pack. Unsurprisingly, LVMH’s share price has surged on the back of the news.

LVMH hit a home run on earnings, impressing investors

graph 1104 lvmh

SOURCE: Yahoo Finance

Arnault, who is not only LVMH’s big boss, but also Europe’s richest man, said: “Digital allows us to reach the client more quickly and directly. Innovation and creativity are fundamental values for LVMH.”

Chinese consumers have been eagerly picking up LVMH’s handbags, makeup, and other luxury products. But with growth forecast to slow to “just” 6.5% in 2018, Arnault is making it perfectly clear that LVMH is not a one-trick pony. One of the Ecommerce initiatives he is banking on is a “startup accelerator” that will encourage entrepreneurs to innovate technologies and services used by the luxury sector.

LVMH has been diversifying its products in China, offering products like luxury sneakers and iPhone cases to entice young shoppers. It saw organic growth of 10% or greater in a number of categories, including spirits, fashion goods, cosmetics and jewelry. The company’s chief digital officer, Ian Rogers, said: “we’ve really seen progress across the board.”

Analysts agree with him. Rogerio Fujimori, an analyst at RBC Europe, wrote: "This is a remarkable start to the year for LVMH, with broad-based market share gains in a buoyant environment for luxury goods.”

Disclosure

Dominion holds LVMH in its Global Trends Luxury Fund.


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