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Abu Dhabi, UAESunday 16 December 2018

LVMH earnings take off at fastest pace in six years

France's biggest company gains from luxury industry recovery that began in China

The LVMH store in New Bond Street in London. The French company is flying high. Chris Ratcliffe / Bloomberg
The LVMH store in New Bond Street in London. The French company is flying high. Chris Ratcliffe / Bloomberg

LVMH’s first-half profit grew at the fastest rate since 2011 as Japan and Europe joined a luxury industry recovery led by China, showing double-digit sales increases in the second quarter.

The world’s biggest luxury-goods company said Japan was boosted by promotional activity like staging Louis Vuitton’s latest runway show there, while Europe was helped by more favourable comparisons in France after a decline in tourism a year earlier. The Paris-based company sounded a cautious note about the second half, citing “geopolitical and economic instability”.

LVMH’s report underlined a luxury industry recovery that began in China after a multi-year slowdown caused in part by a crackdown in corruption. The company’s shares are up about 20 per cent since the start of the year, as investors have welcomed the improved outlook and a €6.5 billion (Dh28.07bn) deal for LVMH to take full control of Christian Dior. In May, LVMH surpassed energy major Total to become France’s most valuable company.

“LVMH has enjoyed an excellent first half, to which all our businesses contributed,” said the chief executive Bernard Arnault. “In an environment that remains uncertain, we approach the second half of the year with caution.”

Profit from recurring operations rose 23 per cent to €3.6bn in the first half, LVMH said. Analysts expected €3.61bn. Second-quarter sales rose 12 per cent on an organic basis, slower than the first quarter’s 13 per cent jump but above analyst predictions.

While sales gains in the second quarter were led by China, up 17 per cent, Japan and Europe showed increases of 11 pe rcent each. Luxury companies have been focusing promotional activity on a new shopping centre in Tokyo.

“It’s a pretty healthy situation in Japan, particularly the local customers,” said the chief financial officer Jean-Jacques Guiony said.

Bloomberg