LVMH results put paid to worries over China trade war
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LVMH results put paid to worries over China trade war

The luxury sector has been watching results season with a very particular worry in mind: will the trade war between China and the U.S. impact sales? It’s an understandable concern, given that China is driving the trend so far this year. Now, however, investors can breathe a sigh of relief: luxury conglomerate LVMH, often described as a bellwether for the luxury sector, has reported quarterly earnings – and they’re reassuringly strong. For now, at least, the luxury sector seems to be holding up more-than okay, as the French giant logged “double-digit growth” in “sectors from fashion to jewelry and cosmetics.”

LVMH’s share price has increased by 25% so far this year

graph 2607 lvmh

SOURCE: Yahoo Finance

LVMH said that sales rose by 11% from the year-ago quarter, beating analysts’ expectations. Shares jumped on the back of strong performance across the board, and LVMH announced plans for “numerous product launches” as it looks to strike out against powerful rivals like Gucci-owner Kering.

China is a crucial territory for the luxury sector, as Chinese consumers account for around a third of all luxury sales, and as much as 70% of the sector’s growth. That’s according to consulting firm BCG. Hence, LVMH, which saw its sales in Asia increase by 17% last year, has to remain mindful of the risks posed by the on-going trade war.

The company’s chief financial officer, Jean-Jacques Guiony, acknowledged LVMH’s brilliant performance over the quarter on an earnings call, but added that the threat of economic uncertainties meant: “the current trends cannot realistically be extrapolated to the second half of the year.”

For now, however, luxury is still having a rosy time in the east. Guiony said: “The threats are there but I don’t think they have materialized yet in any way.”

Disclosure

Dominion holds LVMH in its Global Trends Luxury Fund.


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