LVMH: Designer Ghesquiere's magic touch at Louis Vuitton lifts sales
Louis Vuitton's successful renaissance under star designer Nicolas Ghesquiere boosted sales growth at LVMH's flagship luxury brand and helped the group post stronger-than-expected fourth-quarter sales.
Louis Vuitton, under the creative stewardship of Ghesquiere since Nov. 2013, enjoyed a strong year-end and is trading well, helped by new products and buoyant trading in the United States, LVMH Chief Executive Bernard Arnault said on Tuesday.
The group's fashion and leather division, its biggest in terms of sales, and of which Louis Vuitton represents more than three quarters of revenues, saw comparable sales pick up to 4 percent in the fourth quarter, up from 2 percent the previous three months.
"Overall, a very good set of results, giving the sense that the "cure" at Louis Vuitton is working," Luca Solca, analyst at Exane BNP Paribas said. "I expect the anniversary collection has supported sales and traffic in the stores and "surprised" clients - as Mr Arnault said - which is always the ultimate goal."
Analysts had expected comparable sales at the fashion and leather division, which contributes more than half of LVMH's operating profits, to remain relatively flat.
Overall, LVMH posted stronger-than-expected comparable fourth-quarter sales growth of 5 percent, beating market expectations of around 2-3 percent.
Arnault said fashion brands Celine and Givenchy continued to be successful while Louis Vuitton's profitability remained at "exceptional levels" in the fourth quarter, he added without providing details.
LVMH's fashion and leather unit's operating profit rose 2 percent to 3.19 billion euros last year, while the group's total profit from recurring operations fell 5 percent to 5.71 billion euros, hit by difficulties at its cognac and watch businesses.
The group's performance was dented by a continued drop in cognac sales in China, once its strongest-growing market, hit by anti-corruption measures as well as riots in Hong Kong.
LVMH said it expected cognac sales in China to remain weak in the first quarter of this year but to rebound at the end of the second quarter and in the second half.
Operating profits from LVMH's wines and spirits unit, which includes Hennessy cognac and Krug champagne, fell 16 percent last year, on like-for-like sales down 3 percent.
Another dark spot was the group's biggest watch brand Tag Heuer. Arnault last year appointed industry veteran Jean-Claude Biver, head of the group's watch brand unit, to turn it around.
Tag Heuer's reorganisation and restructuring cast a shadow over jeweller Bulgari which saw an increase in operating profitability. Profits from LVMH's watch and jewellery recurring operations fell 23 percent last year.
Last month, Cartier-owner Richemont said weak luxury watch demand in Hong Kong and Macau halted sales growth in the final quarter of 2014 while British luxury brand Burberry said a fall in sales in Hong Kong in the final quarter of 2014 could hit full-year profitability.