LVMH Returns to Growth, Providing Hope for Luxury Sector

LVMH’s sales grew 1% year over year in the third quarter. (Matthieu Delaty / Hans Lucas/AFP via Getty Images)

Key Points

• LVMH’s third-quarter sales increased by 1% year over year, reaching 19.1 billion euros, exceeding analyst expectations.
• Most LVMH business segments experienced sales growth, with selective retailing, including Sephora, up 7% year over year.
• Fashion and leather goods was the only segment to see a decline, with sales down 2% from the previous year.

After several quarters of notching year over year sales declines, LVMH Moët Hennessy Louis Vuitton is growing again, providing a glimmer of hope for the hard-pressed luxury sector.

LVMH’s third-quarter sales rose by 1% year over year to €19.1 billion ($22.1 billion). Analysts polled by FactSet were expecting revenue of €18.2 billion ($21.1 billion).

All but one of LVMH’s business segments saw a growth in sales throughout the quarter. Fashion and leather goods was the sole segment in the red, with sales down 2% from a year ago. Selective retailing, which includes Sephora, saw sales jump 7% year over year.

The company also said it saw improvement across most of its regions. Notably, sales in both of LVMH’s top markets—the U.S. and Asia excluding Japan—increased, up 3% and 2%, respectively. Local demand, rather than tourism, drove demand in most markets, executives said, including in China, where luxury demand has struggled for several years now.

“We are encouraged by the pocket of improvement that we see in all businesses,” said Cécile Cabanis, LVMH’s chief financial officer, in an earnings call Tuesday.

LVMH’s U.S.-listed shares were rising 8.1% Tuesday afternoon. The company’s improvement was lifting the broader luxury segment on Tuesday. U.S. depository shares of Hermes, Compagnie Financiere Richemont, Kering, and Tapestry were all gaining more than 2% Tuesday, reflecting investors’ hopes that LVMH’s competitors also saw better demand in the third quarter.

LVMH’s stock rally was unfettered by management’s mild caution that the fourth quarter may have some challenging same-store sales comparisons, given that last year’s sales were solid. Encouragingly, the following fiscal year should overall have easier comparable numbers, which will help with sales growth.

“Overall what we see is whenever we are bringing an initiative, or an innovation, or a new retail disruption initiative, it creates immediately a bond, an interest, an excitement, and consumers respond very quickly,” Cabanis said.

There has certainly been a lot of disruption across LVMH’s main houses, particularly in the fashion business. For instance, Dior, Celine, Fendi, Givenchy, and Loewe all have recently-installed creative directors, and their new visions for the brands have recently made headlines in the wake of Paris Fashion Week. Although Cabanis acknowledges it is too early to know the impact the recent shows will have on sales, the momentum is encouraging.

“All in all, we are confident while we remain conscious of the macro environment which is still challenging and continues to be volatile,” Cabanis said.

Write to Sabrina Escobar at sabrina.escobar@barrons.com