LVMH Sparks Fears of Chinese Slowdown Across Luxury Industry -- 2nd Update

By Matthew Dalton 

PARIS -- A mild slowdown at LVMH Moet Hennessy Louis Vuitton SE, the world's biggest luxury goods company, sent a shudder across the sector Wednesday, pushing down stock prices amid fears that a pullback by China's big-spending shoppers could end a yearslong boom for the industry.

LVMH shares traded down more than 7% in Paris after executives detailed third-quarter sales, disclosed Tuesday evening, on a call with analysts. Gucci parent Kering SA fell 10%, Burberry Group PLC dropped more than 8% and Hermes International SCA was down 5.5%.

Louis Vuitton, LVMH's biggest brand, reported a slight slowdown in sales from Chinese shoppers during the third quarter, LVMH Chief Financial Officer Jean-Jacques Guiony told investors and analysts on Wednesday. "But we are really talking about going from high-teens [growth rate] to mid-teens," Mr. Guiony said.

The French luxury-goods conglomerate reported third-quarter revenue of EUR11.38 billion ($13.08 billion), up 10% when adjusting for currency impacts and other factors. But the figure marked a slowdown from 11% in the second quarter and 13% in the first quarter.

Those third-quarter numbers roughly hit market forecasts, but analysts say LVMH needed to do better than that to reassure investors. China's economic slowdown has cast a cloud over the sector in recent months, raising fears that the industry would be hit hard if Chinese shoppers rein in their spending. They are the luxury industry's most important clientele, representing roughly a third of all purchases globally. Concerns about China have sent LVMH shares down around 15% since the end of August, when they were trading near an all-time high.

LVMH is viewed as a bellwether for the luxury goods sector, with dozens of brands including high-fashion house Dior, Cognac maker Hennessy, watchmaker TAG Heuer and dozens of others.

Mr. Guiony also highlighted weakness at some of LVMH's other businesses. The U.S. watch market was weak, particularly for watches priced less than $3,000, he said. "It's really bad below $3,000," he said.

"We are having a tough period with TAG Heuer in the U.S.," he added.

On Tuesday, the company said its fashion and leather-goods division, which includes Louis Vuitton and accounts for more than a third of total revenue, posted 14% organic sales growth in the third quarter.

Sales at its perfumes-and-cosmetics division were up 11% in the three months and its watches-and-jewelry arm was up 10%.

Investor concerns about luxury stocks were compounded by a research note from Morgan Stanley, in which the bank's analysts said they believed Chinese consumer confidence -- traditionally a leading indicator for European luxury companies -- has peaked, with a weaker trend expected in the second half.

--Anthony Shevlin contributed to this article.

Write to Matthew Dalton at [e-mail]

(END) Dow Jones Newswires

October 10, 2018 11:57 ET (15:57 GMT)

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