LVMH Looks to Maintain Demand Driven by China With Digital Sales
(Bloomberg) -- After demand from China drove another quarter of rapid growth for LVMH, Chief Executive Officer Bernard Arnault is counting on e-commerce to help keep his luxury empire ahead of the pack.
First-quarter sales rose 13 percent on an organic basis, the Paris-based owner of Sephora and Christian Dior said late Monday. That beat analysts’ average estimate of 8.5 percent and spurred up the shares as much as 5.7 percent to a record high of 277.25 euros in early Paris trading Tuesday.
While Chinese consumers have been stocking up on LVMH’s Louis Vuitton handbags and Givenchy makeup, the country’s economic growth is expected to slow to 6.5 percent in 2018, according to forecast data compiled by Bloomberg. The maker of Hennessy cognac is intensifying its digital efforts, such as its sponsorship for a startup accelerator that aims to encourage entrepreneurs developing new technologies and services for the luxury industry.
“Digital allows us to reach the client more quickly and directly,” Arnault, who is the company’s chairman and Europe’s richest man, said Monday in an inauguration ceremony for the accelerator. “Innovation and creativity are fundamental values for LVMH.”
The program is located in Station F, a former Paris terminal that telecommunications billionaire Xavier Niel has turned into a sprawling campus for startups.
With more than 4,000 stores from Paris’s Avenue Montaigne to Los Angeles’s Rodeo Drive, LVMH has been boosted by a rising Chinese middle class that is traveling more than ever. It’s also gaining from a push into e-commerce and new products to entice young consumers -- like luxury sneakers and iPhone cases styled like Louis Vuitton trunks.
LVMH moved to ramp up its e-commerce business across its stable of brands last year with new sites for its Celine handbags and Berluti shoes, the first online store in China for its largest brand, Louis Vuitton, and a new multibrand emporium called 24 Sevres.
“We’ve really seen progress across the board,” Chief Digital Officer Ian Rogers said in an interview, pointing to the online openings as well as increased engagement on social-media platforms like Instagram and China’s WeChat.
The company saw organic first-quarter growth of 10 percent or greater in categories such as spirits, fashion goods, cosmetics and jewelry. The strong results across all divisions show that sales momentum for LVMH’s key brands remains intact, said John Guy, an analyst at MainFirst, who raised his rating on the stock to outperform from neutral after the results.
“This is a remarkable start to the year for LVMH, with broad-based market share gains in a buoyant environment for luxury goods,” said Rogerio Fujimori, an analyst at RBC Europe who rates the shares the equivalent of buy, in a note to clients.
Kering SA, owner of the Gucci brand, and Birkin bag-maker Hermes International have also benefited from demand in China. Kering shares rose as much as 7.5 percent, while Hermes gained 1.9 percent.
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