LVMH kicks off luxury reporting with strong results, share price hits all-time high
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LVMH kicks off luxury reporting with strong results, share price hits all-time high

Luxury titan LVMH (the world’s largest luxury company, long seen as a bellwether for the sector) reported strong earnings at the end of last week that beat the Street and demonstrated there was no lack of demand – in China, or elsewhere – for its products. This is a good start to the earnings season for luxury investors and will reassure those who are concerned about a dry-up in luxury demand that the high end of the market, at least, remains as strong as ever.

LVMH’s share price has appreciated by 36% so far this year, hitting an all-time record

Lux

Source: Yahoo Finance

The company logged a significant beat on revenue, seeing its top-line figure come in at 12.5 billion euros. That’s a 16% increase against the same quarter in the previous year – 11%, if reported on a like-for-like basis. Analysts’ had expected to see a like-for-like increase (stripping out currency effects, the impact of acquisitions, etc.) of 8.8%.

The company saw a stand out performance in its leather goods unit, and sales of spirits also improved from the previous quarter as “the Gallerias of Hong Kong and Macau performed particularly well,” according to the company. Mainland China also proved to be an area of particular growth for the brand, helping to ease investors’ concerns about a “Chinese slowdown”. Unsurprisingly, LVMH’s strong first quarter has had a buoyant effect on the luxury sector, and a number of related companies have seen their share prices edge upwards in the aftermath.

Analysts have been eager to express their positivity over the report. SocGen wrote in a note to investors: “we expect growth to continue to slow down in the sector in the first quarter, but LVMH is accelerating from the fourth quarter and should stand above the peer average this year.” The company raised its guidance on the stock to a “buy”.

RBC Capital Markets was also keen to point out LVMH’s good news story, writing: “In a nutshell, LVMH’s equity story remains intact - leadership market positions, broad-based market share gains, relatively stable earnings profile thanks to the quality of its assets, portfolio diversification and geographical balance, and great management team.”

Disclosure

Dominion holds LVMH in its Global Trends Luxury Fund.


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