Abu Dhabi, UAEThursday 21 November 2019

Luxury goods firm LVMH posts strong profit growth despite Hong Kong turmoil

Company's third quarter revenue grows 19 per cent, ahead of analysts' forecasts

LVMH chairman and chief executive officer Bernard Arnault speaking at the launch of the company's recent enviornmental programme, Life. AFP 
LVMH chairman and chief executive officer Bernard Arnault speaking at the launch of the company's recent enviornmental programme, Life. AFP 

LVMH’s sales of luxury goods to key Chinese consumers have kept growing rapidly despite a slump in the Hong Kong shopping hub caused by anti-Beijing protests.

The owner of Louis Vuitton and Christian Dior threw down a gauntlet to rivals with 19 per cent third-quarter revenue growth in fashion and leather goods. Analysts had predicted a 15 per cent gain on a comparable basis.

LVMH shares rose as much as 5.5 per cent in Paris on Thursday, the most since January, and are up 45 per cent this year. Gucci owner Kering and Cartier parent Richemont posted smaller gains.

The luxury leader’s strong performance allays some concerns about the effects of the Hong Kong disruptions, showing that the Chinese demand that is increasingly driving growth in the industry remains robust. The demonstrations against the tightening grip of China’s government in the city have curbed travel to Hong Kong by mainland consumers, but they’re still splashing out on high-end fashions elsewhere.

“We believe that the bulk of the Hong Kong weakness has been compensated in other markets,” Citi analyst Thomas Chauvet said in a note. “This sets the bar pretty high for peers.”

Total sales at the luxury conglomerate, which also makes Dom Perignon Champagne and owns cosmetics retailer Sephora, rose 11 per cent to €13.3 billion (Dh53.8bn), beating the 9 per cent consensus estimate.

The overall gain masked weakness in Hong Kong, where August and September sales fell 40 per cent, chief financial officer Jean-Jacques Guiony said on a call Thursday, a day after the company’s report. While that will hurt LVMH’s profitability this year because of high fixed costs in the city, the company is confident business will recover eventually, he said.

“It’s out of the question that we would consider that Hong Kong will not be a strong business centre in the years to come,” he said.

Forecasts for the luxury giant’s growth were tempered as LVMH boutiques in Hong Kong became a backdrop for protests that spilled from the city’s streets to its airport and shopping malls. About 6 per cent of the company’s sales were registered in Hong Kong dollars during the first half of the year, according to an interim financial report.

Updated: October 10, 2019 08:55 PM

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