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Weaker euro helps LVMH sale over the first quarter

By Angela Gonzalez-Rodriguez

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Business |ANALYSIS

World largest luxury group, LVMH, has posted a 3 percent rise in like-for-like sales for the first quarter, boosted by a weak euro against an ever stronger dollar and what it called an “excellent start to the year” at Louis Vuitton.

However, this positivism was not shared by the market, as the group's fashion and leather unit, mainly made of Louis Vuitton sales, saw revenue rise at 1 percent like-for-like, significantly below the 9 percent rise in the year-ago period and 4 percent increase in the fourth quarter, as reported Reuters. In comparison, majority of analysts following the stock expected a rise of at least 2 percent.

Revenue advanced to 8.32 billion euros, slightly over the 8.13 billion euros on average estimated by analysts polled by Bloomberg. Excluding acquisitions, disposals and currency swings, revenue climbed 3 percent.

“The Paris-based company should continue to trade at a premium to its European luxury peers as sales of cognac and watches improve in the second half of 2015,” according to Sanford C. Bernstein.

It is noteworthy that renewed demand for Louis Vuitton handbags has also helped to lift LVMH shares about 30 percent this year.

Answering to the market, the French luxury giant highlighted that last year's comparative figure was boosted by shoppers in Japan snapping up Louis Vuitton bags and other luxury goods ahead of a VAT hike on April 1.

"This is not a home run, but a very solid set of results," said Exane BNP Paribas luxury goods analyst Luca Solca.

Watches and jewellery sales pushed by weaker euro

More optimistic was Thomas Chauvet, an analyst at Citigroup in London, who said that “This is a respectable outcome considering the tough basis of comparison.” Chauvet currently reiterates his ‘buy’ recommendation on the stock.

LVMH reported that a weaker euro helped to push the sales total of watch and jewellery division by 19 percent on a year-on-year basis to 723 million euros in the first quarter that ended on March 31. On a constant exchange-rate basis, the increase was 7 percent.

Overall, LVMH recorded group revenue of 8.8 billion dollar (8.323 billion Euro), which was up 16 percent on a reported basis, but when the impact of the weaker euro was removed, organic growth was 3 percent.

It is worth to remember that the euro has fallen approximately 23 percent against the dollar in the past 12 months.

“The group recorded excellent momentum in Europe and the United States,” LVMH added.

The luxury group will hold its annual general meeting on April 16.

LVMH