Shares in LVMH — the Louis Vuitton, Moet, Christian Dior, and Hennessy Cognac group — hit record highs and the rally extended to its luxury goods rivals, after it signalled strong momentum with better-than-expected first quarter sales growth.
The upbeat start to the year for LVMH, the industry’s biggest company, sets an encouraging tone for peers and points to enduring demand from Chinese consumers, which sustained strong earnings at many luxury firms last year.
Trade tensions between the US and China, meanwhile, could have a knock-on effect on the sector if they hurt Chinese consumer sentiment, analysts at BNP Paribas said earlier this week.
LVMH, which derives the biggest slice of sales from its mega-brand Louis Vuitton, reported a 13% sales rise from a year earlier on a like-for-like basis, which strips out currency swings and sales and acquisitions. That beat expectations for an increase of around 9 percent in the January to March period.
LVMH shares surged 4.5%, valuing the group at almost €138.2bn.
The shares of its French rival Kering, owner of Italian fashion brand Gucci, also briefly touched record highs at €54bn, while Britain’s Burberry also rose, valuing it at over €8.2bn.
“LVMH’s results confirm the ongoing strong underlying trends in the market,” analysts at Berenberg said in a note.
Rebounding Asian appetite for luxury goods, especially from a younger generation of shoppers comfortable with buying big-ticket items online, is a major motor for the industry.
But headwinds still lurk and investors have been seeking reassurance that the sector’s revival was not running out of steam, especially as earnings comparisons against a strong 2017 may not be as favourable.
A strong euro is still a disadvantage, as it can put off foreign shoppers and can hurt sales made in other currencies and converted back into euros.
Currencies had a 10% negative impact on LVMH’s sales in the first quarter, more than some analysts had expected, although some added that the company should be able to mitigate this risk in future by hiking prices.
— Reuters, additional reporting Irish Examiner