January 25, 2018 / 9:24 PM / 25 days ago

Louis Vuitton-owner LVMH upbeat as Chinese shoppers lift sales

PARIS (Reuters) - LVMH (LVMH.PA), the world’s biggest luxury goods maker, said on Thursday it had made a favourable start to 2018 after a revival in Chinese demand boosted sales last year and spurred on some of its major brands like Louis Vuitton.

The French company, whose 70 labels range from Dom Perignon champagne to fashion houses like Fendi and Givenchy, posted record revenues and operating income for 2017 as it rode an industry turnaround and increased online sales.

“China has had a good comeback,” Bernard Arnault, LVMH’s billionaire chairman and chief executive, told a news conference, adding other regions including the United States also performed strongly.

“These global business trends are continuing into this year,” he said.

In an industry vulnerable to shifting trends and challenges such as falling tourist travel or a crackdown on luxury gifts in China that hurt manufacturers in recent years, companies are now scrambling to make sure they capitalise on improving demand.

LVMH rival Kering (PRTP.PA) has benefitted from the upturn, attracting young consumers with its new, colourful Gucci designs, while Richemont (CFR.S), whose brands include Cartier, reported solid appetite in the Asia Pacific in the last three months of 2017.

At LVMH, the Louis Vuitton brand remains the biggest earnings driver, accounting for more than half of group profits, propelled last year by collaborations with streetwear label Supreme and the launch of a smart watch.

LVMH’s fashion and leather goods division posted revenues of 15.5 billion euros in 2017, up 13 percent like-for-like. Sales rose 10 percent in the fourth quarter on a constant currency basis, slowing slightly from the 13 percent notched up a quarter earlier but still beating forecasts.

LVMH is now seeking to expand its Celine brand, with a push into menswear and perfume. It has hired one-time Saint Laurent designer Hedi Slimane to replace artistic chief Phoebe Philo.

Arnault said LVMH aimed to grow annual revenue at Celine to between 2 billion to 3 billion euros within five years, from close to 1 billion euros now.

    HIGH PRICES

    The French group said it still had some way to go to improve the performance of some of its smaller brands, like Marc Jacobs.

    Sales in its wine and spirits unit were better than expected in the fourth quarter, but were still constrained last year by stock shortages in its Hennessy cognac label.

    Arnault said geopolitical and economic risks still posed challenges. He said LVMH was grappling with a strong euro, that penalised the group when it converted revenues to the currency.

    Arnault, who built up his luxury goods group through a stream of purchases, said prices were now high for acquisitions now. “I’d probably wait for the next crisis,” he said.

    LVMH, which does not break out earnings for its labels, said group operating income for the whole of 2017 was 8.29 billion euros ($10.36 billion), up 18 percent from a year earlier and in line with forecasts.

    The conglomerate was partly boosted by the full integration of the Christian Dior fashion label. LVMH swooped last year on the couture part of the brand it did not already own, uniting it with the perfume and beauty parts of the Dior business.

    Editing by Elaine Hardcastle and Edmund Blair

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