LVMH Shares Climb on Strong Results, Confidence in China
February 03 2016 - 8:03AM
Dow Jones News
By Jason Chow
PARIS--Shares in LVMH Moët Hennessy Louis Vuitton SE jumped as
much as 7% on Wednesday as investors were encouraged by the French
luxury group's strong fourth-quarter revenue growth and Chief
Executive Bernard Arnault's confidence that Chinese consumers would
keep spending on expensive handbags and pricey liquor.
Shares were trading at EUR154.50 by midday, off a morning peak
but still 6% higher than the previous day's close.
LVMH reported Tuesday evening a 12% rise in fourth-quarter
revenues, fueled by strong demand for its fashion and leather goods
as well as its alcoholic drinks. The luxury bellwether--LVMH's
brand portfolio includes fashion, accessories, liquor, jewelry and
watches as well as the DFS duty-free chain and the Sephora
cosmetics label--showed signs of resilience amid weak global
economic growth and the Nov. 13 attacks in Paris that curbed
tourist flows to the French capital.
LVMH, which generated EUR10.38 billion ($11.3 billion) in sales
during the final three months of last year, was also optimistic
that it would continue to grow despite the unsteady economic
outlook and a major downturn in global stock markets.
Mr. Arnault said that fears about a slowdown in sales to Chinese
consumers--a demographic that experts say make up more than a third
of total overall global luxury spending--were overblown.
"Analysts underestimate the Chinese economy," he said Tuesday
evening. "The fundamentals are good. Household spending is still
increasing, and that's important to us."
Mario Ortelli, a luxury analyst at Sanford C. Bernstein, said he
was "encouraged by the company CEO's confidence going into 2016
despite the volatile economic environment."
However, not all in the luxury industry are faring well. Swatch
Group AG, which owns high-end brands including Longines, Breguet
and Omega, said Wednesday net profit fell to 1.09 billion Swiss
francs from 1.38 billion francs, hurt by the strength of the Swiss
currency and weak demand for expensive timepieces. The profit
figure was also below analysts' expectations.
That news sent shares in the Swiss watch company down as much as
4% in early trading, before rebounding later in the day. At midday,
the shares were trading at 333.20 francs, or about 2% lower than
Tuesday's close.
Swatch declined despite the company's decision to buy back 1
billion Swiss francs ($982 million) of its shares. Analysts at Citi
said there was "not much to cheer for" in the latest results, which
reflected "adverse macro and geopolitical environment, global price
gap distortion from [foreign-exchange] volatility and further
demand weakness for Swiss watches in Hong Kong."
John Revill in Zurich contributed to this article.
Write to Jason Chow at jason.chow@wsj.com
(END) Dow Jones Newswires
February 03, 2016 07:48 ET (12:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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