LVMH Shares Surge as Sales Show Luxury Defies Pandemic Gloom

LVMH’s first-quarter sales soared, sending the stock to a record and pointing to the luxury sector’s recovery from a pandemic-induced slump.

Revenue at the fashion and leather goods unit surged 52% on an organic basis from a year earlier, the company said late Tuesday. Analysts had expected a 30% increase. Gains in China drove the “eye-popping organic growth,” said Francesca DiPasquantonio, an analyst at Deutsche Bank AG.

In a further sign of buoyancy, LVMH’s performance even topped the same period in 2019. The report may indicate how well major fashion houses have been able to sustain demand outside of places like China, which emerged earlier from the pandemic and reopened shops.

“The cyclical rebound, given the re-openings and easy base, should lift everyone,” DiPasquantonio wrote in a note to clients. Brands like LVMH and Hermes International, which appeal to local clients, should perform better than those more reliant on tourism, she said.

LVMH ‘Smashes’ Consensus Forecasts, Good for Sector: Bernstein

The stock rose as much as 3.2% in Paris trading, reaching a record 613.9 euros. The report prompted analysts to upgrade their sales and earnings growth estimates for the year.

LVMH’s fashion and leather goods division has been the key driver throughout the crisis, benefiting from the growth of the Christian Dior and Louis Vuitton brands.

Revenue in Asia excluding Japan jumped 86% on an organic basis from a year earlier, followed by the U.S. which grew by 23%. Sales in Europe meanwhile were still down 9% compared to last year.

“LVMH is the first luxury-good peer to confirm a post-pandemic recovery,” Bloomberg Intelligence analyst Deborah Aitken wrote in a note. The results raise “expectations for the entire sector.”

Virtual Catwalks

With catwalks having gone virtual for most of the past year, Dior and Vuitton have tried to entice customers by showcasing collections in sumptuous locales such as the Chateau de Versailles through Instagram and other platforms.

LVMH Shares Surge as Sales Show Luxury Defies Pandemic Gloom

In a sign of how much Asia has emerged from the pandemic, Dior unveiled its disco-inspired women’s ready-to-wear fall collection in Shanghai this week in front of a large audience. That’s in stark contrast to the situation in LVMH’s home country of France, which is in the midst of a third lockdown as it approaches 100,000 virus fatalities.

First-quarter revenue at the luxury giant rose 30% on an organic basis to just under 14 billion euros ($16.7 billion). Analysts had expected 12.7 billion euros.

Despite the gloom in Europe -- where most fashion stores remained closed at the start of this month -- LVMH is experiencing a “surge” in demand from local clients, Chief Financial Officer Jean-Jacques Guiony said during a call with analysts.

“It’s a very good signal,” Guiony said, although it’s “not sufficient to offset the fact that tourists are gone.” European clients are typically making more frequent purchases but spending less, he said, adding that LVMH isn’t planning to reduce its European store footprint.

Integrating Tiffany

Tiffany & Co., which officially became part of LVMH in January, has experienced a “strong start” to the year. Guiony said LVMH has increased prices on some of its silver products and he expects the overhaul at the U.S. jeweler to “take years” -- notably for the distribution, merchandising and marketing of the brand.

“We know there’s a lot to be done within the next years and we’ll do it,” he said.

LVMH is currently focused on integrating Tiffany and doesn’t plan to “dilute our efforts” with other acquisitions, according to Guiony.

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