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By
Reuters
Published
Jan 26, 2017
Reading time
3 minutes
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LVMH 2016 profit beats forecasts, fashion and leather goods outperform

By
Reuters
Published
Jan 26, 2017

LVMH, the world's biggest luxury group, posted record revenue and profits for 2016 which beat expectations thanks to strong sales in the United States and Europe and a pick-up in demand in Asia.

Chairman and CEO Bernard Arnault thought the first half of 2017 should be "relatively easy" for the group, but warned that tougher year-ago comparisons and uncertainties ranging from the impact of Brexit to the new Trump administration could make the second-half "more difficult".


LVMH's fashion and leather divisions beat forecasts and posted 9% growth for the quarter. - LVMH


He also said stocks of its cognac and Louis Vuitton products are running low and could curb growth this year. "My sentiment for 2017 is one of caution. When everything is going so well, one must be very vigilant," Bernard Arnault told a news conference.

The group, whose key brands include Louis Vuitton, Dior, and Hennessy cognac, said 2016 profit from recurring operations rose 6 percent to 7.03 billion euros (6 billion pounds), beating the 6.8 billion euros median estimate in a Reuters poll of 12 analysts.

Fourth quarter sales rose to 11.27 billion euros, a like-for like growth of 8 percent, above analysts' estimates for 5.6 percent growth. LVMH, which raised its dividend by 13 percent, added it was cautiously confident over its prospects for 2017.

"Despite a climate of geopolitical and currency uncertainties, LVMH is well-equipped to continue its growth momentum across all business groups in 2017," the group said in a statement.

The group, whose key brands include Louis Vuitton, Dior, and Hennessy cognac, said 2016 profit from recurring operations rose 6 percent to 7.03 billion euros ($7.5 billion). This compared with the 6.8 billion euros median estimate in a Reuters poll of 12 analysts. Fourth quarter sales rose to 11.27 billion euros, a like-for like growth of 8 percent, above analysts' estimates for 5.6 percent growth.

LVMH's fashion and leather division, which accounts for the bulk of its sales and profits and is home to the Louis Vuitton, Fendi and Givenchy brands, had like-for-like revenue growth of 9 percent in the fourth quarter - above market forecasts. Analysts had expected growth of 5 percent in the quarter for the fashion and leather part of the LVMH business.

Its wines and spirits division also reported a 7 percent rise in sales, helped by good growth in the U.S. and a rebound of cognac sales to China and other Asian markets. "Hennessy cognac is a great success and stocks are now at their lowest levels, so this could slow our business," Arnault said.

LVMH's rivals in the luxury industry, such as Cartier owner Richemont and British luxury brand Burburry, have also signaled better demand in mainland China and improving tourist spending in the last part of the year. Several analysts expect the luxury goods sector to benefit in 2017 from improved consumer sentiment in China, tax cuts under the new Trump administration and robust Middle Eastern demand due to higher oil price.

Growth in the luxury goods market had shown signs of a slowdown, notably in the second half of 2015 after attacks in Paris put off tourists travelling to Europe, where many luxury brands make a significant proportion of their sales.

Global spending on luxury goods by tourists was up in December for the first time since February, lifted by strong business in Britain and France, a study by tax-refund services firm Global Blue showed.
 

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