• Bloomberg


LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods company, reported first-half earnings that trailed estimates as the strength of the euro weighed on growth and the first stage of the Japanese tax hike hurt sales of fashion and leather goods.

Profit from recurring operations fell 5 percent to €2.58 billion ($3.5 billion), Paris-based LVMH said Thursday after European markets closed. Analysts expected €2.76 billion, according to the median of 18 estimates compiled by Bloomberg.

April’s 3-point hike in the consumption tax added to the difficulties of softening demand for expensive liquor and watches. Fashion and leather-goods sales climbed 4 percent in the first half, LVMH said, trailing analysts’ estimates by 2 percentage points.

“The second quarter showed comparable regional trends to the first quarter, except in Japan, which had experienced particularly strong growth during the first quarter,” LVMH said in a statement.

The comments echoed Hermes International SCA, the Birkin bag maker partly owned by LVMH, which last week reported a 6.3 percent drop in quarterly sales in Japan.

Negative exchange-rate effects “weighed strongly” on the first half, LVMH said, adding that it’s confident of achieving further market-share gains in its traditional markets as well as in high-potential emerging territories.

Sales advanced 3 percent to €14 billion. Analysts predicted €14.2 billion. Excluding currency swings and acquisitions, sales climbed 5 percent.

Wines and spirits sales declined 1 percent on an organic basis, dragged down by cognac in China as destocking by distributors continued in the second-quarter, LVMH said. Profit at the unit declined 15 percent, the company said.

Sales of watches and jewelry climbed 3 percent, trailing estimates. Uncertainties linked to the economic climate continue to make multibrand retailers prudent in their purchasing, LVMH said, adding that the performance in its own stores showed “significant” growth. Profit at the unit declined 31 percent, dragged down by currency shifts.

The Swiss watch industry is struggling amid political protests in Hong Kong, which imports about a fifth of the timepieces that Switzerland produces. Hong Kong, where wealthy Chinese have increasingly shopped to avoid the mainland’s luxury taxes, will remain fragile in the second half, Swatch Group AG CEO Nick Hayek said July 22 as the watchmaker reported its first drop in first-half earnings in five years.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.