Surge in sales of Louis Vuitton handbags shows luxury spending is back

Revenue has soared at fashion houses owned by LVMH

Sales of Louis Vuitton handbags surged in the last quarter, showing appetite for luxury goods has not diminished.

Sales of Louis Vuitton handbags and the easing of lockdowns across the world helped revenue soar at fashion houses owned by LVMH.

In a bumper quarter for the owner of some of the world’s best-known luxury brands, like-for-like sales rose 84% last quarter, outstripping analysts’ expectations.

Demand for fashion and leather goods, particularly at Louis Vuitton, Christian Dior, Fendi, and Celine, fuelled the gain and showed consumers’ appetite for luxury goods as they emerge from pandemic restrictions and vaccination campaigns accelerate.

LVMH benefited from an easy comparison with 2020, when many stores were shut due to early pandemic lockdowns.

Even so, the report will probably prompt earnings upgrades for others in the industry because LVMH is seen as a bellwether, according to Luca Solca, an analyst at Sanford C Bernstein.

“Whatever a post-pandemic world may look like, LVMH are already a significant winner,” Flavio Cereda, an analyst at Jefferies, said.

Organic revenue at LVMH’s fashion and leather goods division surged 120% in the second quarter from a year earlier and 40% from the same period in 2019, the company said.

LVMH was active in the period, presenting a so-called cruise collection from Christian Dior at an Athens event attended by celebrities such as Catherine Deneuve and The Queen’s Gambit star Anya Taylor-Joy. 

It also launched a new sparkling wine aperitif and reopened La Samaritaine, a department store located on the right bank of Paris that had been shut for more than 15 years.

Profit from recurring operations reached €7.63bn in the first half. Analysts had expected €6.62bn. The operating cost base during the period was flat compared with 2019, said chief financial officer Jean-Jacques Guiony.

LVMH is also seeing progress with local clients in Europe, although it isn’t sufficient to offset the lack of tourists, Mr Guiony said. 

Last month, billionaire LVMH founder Bernard Arnault predicted foreign visitors may not return to Paris within the next year or two.

The goal for travel retail business DFS in the second half of this year will be to break even, Mr Guiony said, warning it’d be difficult.

Speaking about LVMH’s M&A strategy, Mr Guiony said absorbing its latest portfolio brand Tiffany will take some time and that the group typically doesn’t proceed with such big takeovers “every other year”.