By Dominique Patton
PARIS, July 27 (Reuters) – Sales at luxury giant LVMH edged higher in the second quarter as strong demand from affluent U.S. shoppers helped offset weaker spending in Europe, where tourism has been hit by the Iran war.
Sales at the owner of Louis Vuitton, Dior and Bulgari rose 3% when adjusted for currency swings to €19.5 billion ($22.2 billion), broadly in line with analysts’ consensus estimate, according to Visible Alpha.
Growth was driven by the U.S., where sales rose 6% after a 3% increase in the first quarter, LVMH said, citing strong demand fuelled by newly created wealth, such as from the AI and technology booms.
The Watches & Jewellery division was the group’s fastest-growing business, with sales up 11%, accelerating from 7% in the previous quarter. Tiffany and Bulgari posted growth in the mid-teens as wealthy shoppers continued to favour jewellery over soft luxury categories.
European luxury brands have stepped up their focus on the United States, opening stores and staging fashion events to tap wealth generated by record-high stock markets.
However, the update from LVMH — the first major luxury group to report first-half results — may not be enough to reassure investors that the $400 billion luxury sector is finally emerging from a two-year downturn.
FASHION AND LEATHER GROWING MUCH SLOWER THAN HARD LUXURY
The fashion and leather goods division, which generates the bulk of LVMH’s operating profit, posted 1% organic growth. That was its first quarterly increase in two years, but fell short of analysts’ expectations for a 1.7% rise.
LVMH said the Iran war reduced growth in the division by 1 percentage point, but added that Dior was gaining momentum under new creative director Jonathan Anderson.
In Europe, sales were flat in the quarter, stabilising after a decline in the first three months of the year as conflict in the Middle East weighed on tourism.
LVMH’s U.S.-listed shares fell after the results. They were down 1.8% at 1606 GMT, having briefly slipped to their lowest since June last year.
For the first half, sales rose 2% on an organic basis, but fell 3% on a reported basis to €38.6 billion. Over the same period, profits from current operations fell 4% to €8.7 billion, as currency moves reduced earnings by about €700 million, though the operating margin was broadly stable at 22.5%.
Shares in the French group, controlled by billionaire Bernard Arnault, have fallen 28% since the start of the year, making LVMH one of Europe’s worst-performing large-cap stocks.
($1 = 0.8792 euros)
(Reporting by Dominique Patton and Florence Loeve. Editing by Lisa Jucca and Mark Potter)
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