LVMH Sales Rose 17% to Almost $6 Billion in Q3

LVMH Moët Hennessy Louis Vuitton reported that sales rose 17% in the third quarter, fueled by rapid growth in fashion and leather goods, despite the sharp drop in tourism in Hong Kong as a consequence of nearly four months of violent anti-government protests.

Sales totaled 13.32 billion euros ($14.67 billion) in the three months ended Sept. 30, up 11% on an organic basis, the company said. Analysts had banked on a 9% rise in like-for-like revenues.

Tourist arrivals in Hong Kong fell nearly 40% in August versus the same period last year, following a 5% drop in July, representing the biggest monthly decline since the SARS outbreak in 2003. Retail sales plummeted by a record 23% in August, according to the most recent government data.

LVMH’s performance was driven by its key fashion and leather goods division, which includes Louis Vuitton, Dior and Fendi. It saw revenues rise by 19% on a like-for-like basis to 5.45 billion euros ($6 billion) during the third quarter, again sharply exceeding consensus estimates.

The division had posted organic growth of 14% in the same period a year ago, and recorded a 20% rise in like-for-like sales in the second quarter.

Wines and spirits were up 8%, while perfumes and cosmetics recorded organic growth of 7%. Selective retailing, which includes duty-free operator DFS and beauty retailer Sephora, grew 4%, and watches and jewelry posted a 5% increase.

“DFS continued to grow over the first nine months of the year despite the slowdown in Hong Kong,” LVMH said in a statement issued after the market close.

The industry bellwether’s quarterly sales figures come before luxury rivals Kering and Hermès International, both due to report on Oct. 24. Compagnie Financière Richemont is scheduled to publish interim results on Nov. 8.

The unrest in Hong Kong could have a negative impact of between 0.6% and 1.2% on global luxury growth this year, if the fourth quarter is as badly hit as August and September, Bernstein said in a recent research report.

It estimated Hong Kong accounts for 5% to 10% of global luxury sales — in the higher end of the range for hard luxury and in the lower end for soft luxury. Bernstein said it assumed the sales decline in the third quarter was 50% in Hong Kong and that there would be no improvement in the fourth quarter.

Analysts estimate that Hong Kong accounts for around 6% of LVMH’s overall sales, and some of those purchases will have been transferred to other parts of Asia.

“We expect that more than half of the sales decline in Hong Kong to be offset by repatriation of purchases to [Mainland China] and dynamic trading in other Asian markets like Korea and Japan,” Rogerio Fujimori, analyst at RBC Capital Markets, said in a recent report.

He sees no end in sight to the political turmoil in Hong Kong, concluding that tourism from Mainland China should remain very weak for the next six to nine months. “We believe that most brands could suffer sales declines in Hong Kong to the tune of minus 30% to minus 60% in Q3,” he wrote.

Edouard Aubin, analyst at Morgan Stanley, said DFS is particularly exposed, with an estimated 45% of its sales coming from Hong Kong and Macao. Bulgari also risks taking a hit, with Aubin estimating that Chinese nationals account for 55% of the Italian jeweler’s sales. LVMH is due to provide further details Thursday in a conference call with CFO Jean-Jacques Guiony. The luxury group’s share price is up around 41% so far this year. LVMH chairman and CEO Bernard Arnault is listed as the world’s third richest man in the Bloomberg Billionaires Index, with a net worth of $90.8 billion.

This story was reported by WWD and originally appeared on WWD.com.

Access exclusive content