LVMH has sought to update its image this year with initiatives such as a Louis Vuitton smartwatch, an exclusive deal to sell Rihanna’s new makeup and a renewed push online, introducing a multi-brand e-commerce site and a Louis Vuitton web store for China.
On Monday, the world’s biggest luxury-goods company showed those efforts are bearing fruit.
Third-quarter sales grew 12% on an organic basis, Paris-based LVMH said after markets closed, beating analyst expectations. Shares in European luxury stocks gained yesterday and LVMH stock approached a record as markets took the update as a signal that this year’s luxury rebound is set to continue.
“Momentum remained strong for luxury in the third quarter, yet we still expect a sharp contrast in performance between the ‘hot’ brands and others,” wrote Hermine de Bentzmann, an analyst at Raymond James.
Fast-growing fashion brands in the LVMH stable include Italian fur-specialist Fendi, where a more colourful store concept and growing menswear business have boosted sales, as well as the Spanish accessories house Loewe, which the company has worked to overhaul since 2013 under the British designer Jonathan Anderson.
Louis Vuitton, which is estimated to account for roughly a quarter of group sales, has continued to hone a more high-tech image. In addition to the smartwatch launched in July, the suitcase maker now sells tiny monogrammed trunks just big enough for an iPhone. The brand set up pop-up stores in cities including Sydney and Seoul to sell from menswear designer Kim Jones’s collaboration with the skateboarding brand Supreme. Sales of fashion and leather goods rose 13%, on par with the previous quarter against a higher base of comparison.
Sales of perfume and cosmetics surged 17% on an organic basis. The company cited continued success of Dior’s J’adore and Sauvage perfumes as well as the introduction of the new Fenty Beauty by Rihanna brand at LVMH’s Sephora. Fans of the Barbadian pop singer, who has 57mn followers on Instagram, lined up at the store last month to test her new beauty line, which includes 40 shades of foundation.
The luxury sector has seen a return to rapid growth this year after a four-year slowdown sparked by economic uncertainty and a crackdown on state corruption in the key Chinese market as well as terror attacks that prompted many well-heeled travellers to skip their European vacations.
But the luxury rebound has been uneven-with brands like Kering’s Gucci racing ahead while Prada and Tod’s have yet to catch the wave. Those brands are being punished for dragging their feet on investing in e-commerce, as well as failing to read consumer trends such as the rise of luxury sneakers at the expense of more formal shoes, according to analysts.
“The release confirms our expectations that ‘winners will continue to win’ in soft luxury,” Luca Solca, an analyst at Exane BNP Paribas, said in a note.
The only division to miss estimates was LVMH’s wine and spirits business, where the company has said supply constraints at Hennessy cognac are putting the brakes on growth.
The company, whose full name is LVMH Moet Hennessy Louis Vuitton, passed Total in May to become France’s most valuable company by market capitalisation. Sales were adjusted to reflect currency swings as well as the integration of Christian Dior Couture.
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