LVMH: sales remain strong, but commentary sends the share price down
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LVMH: sales remain strong, but commentary sends the share price down

Luxury titan LVMH posted positive earnings this week, despite investors’ concerns over the health of the Chinese economy. The company said that sales in China remained strong, and it posted results that would normally bring a smile to investors’ faces. However, it acknowledged the fact that operating a global business “in an uncertain geopolitical and monetary context” came with its own challenges.

The company said it would “remain vigilant” when it came to the Chinese market, which is beset by a depreciating currency and a trade war with the U.S. Despite strong underlying results, this comment did not reassure investors, who sent the company’s share price down on the back of the news.

LVMH’s share price is still up by 8% so far this year

graph 1110 lvmh

SOURCE: Yahoo Finance

Despite the somewhat ominous warnings, LVMH’s actual results should go some way to soothing investors’ concerns over China. Whatever’s around the corner, the last six months has undoubtedly seen Chinese fashionistas remain committed to spending on their favourite brands.

LVMH, which owns top-level brands like Louis Vuitton, Celine, Christian Dior, and Givenchy, continued to see strong sales momentum into the third quarter, with organic revenue rising by 10% against the same period in the previous year. That’s in-line with analysts’ expectations, and broadly in-line with LVMH’s performance in 2018 more generally. The stand out performer over the quarter was LVMH’s core leather and fashion segment, which grew 14% from the third quarter of 2017. For the first 9 months of 2018, the company said revenue rose by 11%, year on year.

These are good results – it’s not even arguable. But the wider context, many investors fear, does matter. Summarising the situation, Euromonitor fashion analyst Florence Allday said: “Despite strong sales in LVMH’s fashion and leather goods sector and a healthy performance overall, shares in the luxury conglomerate and across the luxury fashion industry today have dropped, as the possibility of a Chinese-American trade war continues to simmer in the background.”

Disclosure

Dominion holds LVMH in its Global Trends Luxury Fund.


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