LVMH Moet Hennessy Louis Vuitton SA (MC)[1] fell the most in more than two years after slowing fashion and leather-goods growth suggested that efforts to turn around its biggest brand have yet to take hold.
Revenue at LVMH’s fashion and leather-goods division rose 4 percent on an organic basis in the first nine months of 2013, the company said yesterday, slowing from the first-half’s 5 percent gain and trailing the 6 percent estimate of analysts.
Vuitton, which Exane BNP Paribas estimates accounts for more than half of LVMH’s earnings, is slowing retail expansion, including more precious materials in its collections and adding products with fewer logos in an effort to appeal to the wealthiest shoppers. Such initiatives will take “at least another 12 months” to produce tangible results, Allegra Perry, an analyst at Cantor Fitzgerald, said after the report.
Although the reaction of clients to Louis Vuitton’s new soft leather-product ranges is “very good, in terms of impact on global sales it’s not a major thing,” Chief Financial Officer Jean-Jacques Guiony said today on a conference call, adding that the brand’s organic revenue growth was “slightly below” the fashion and leather-goods division’s 3 percent rate last quarter. The transition “is going to take some time.”
The stock[2] dropped as much as 6.7 percent to 135.15 euros. That decline was the steepest since Sept. 22, 2011, and wiped out the gains for 2013.
Capucine Bag
Louis Vuitton this year introduced bags such as the Capucine bag, which has been worn by actress Angelina Jolie, and the W, a combination of a canvas and calfskin leather purse that can sell for $4,000.
LVMH’s fashion and leather-goods growth “is very disappointing following significant excitement” around these bags when they were introduced, said Julian Easthope, an analyst at Barclays Capital in London[3] .
The company, which published its sales numbers after markets closed yesterday, said it remains confident for 2013, even in the face of an uncertain European economic climate. LVMH will continue to focus on innovation and geographc expansion in selected markets.
LVMH is boosting investment in some of its smaller fashion brands and buying stakes in others to help offset slowing growth at Vuitton, its biggest source of revenue. It’s also shuffling Vuitton’s management, with Delphine Arnault joining as executive vice president and artistic director Marc Jacobs leaving after 16 years to focus on his own label.
“We think the opportunity on the contemporary market is extremely strong and we intend to benefit from it,” said Guiony. “That’s the logic of Marc Jacobs focusing on his own brand.”
New Normal
Total third-quarter revenue advanced to 7.02 billion euros ($9.5 billion) from 6.9 billion euros, LVMH said. Analysts predicted 7.24 billion euros, according to the median of 15 estimates compiled by Bloomberg. Sales climbed 8 percent excluding acquisitions, disposals and currency moves, missing the 10 percent gain analysts had expected.
LVMH’s performance “seems to suggest growth is moderating to a new normal, which is weighing on the whole sector,” said Luca Solca[4] , an analyst at Exane BNP Paribas.
Burberry Group Plc (BRBY)[5] fell as much as 2.7 percent in London today, extending yesterday’s 7.6 percent slide after Chief Executive Officer Angela Ahrendts said she was leaving the U.K.’s largest luxury-goods maker. Swatch Group dropped as much as 3.1 percent and Cie. Financiere Richemont SA slid as much as 2.9 percent.
Do Better
L’Oreal fell as much as 2.9 percent to 120.50 euros in Paris after LVMH said nine-month organic revenue at its perfume and cosmetics unit rose 5 percent, slowing from the first-half’s 6 percent increase. Analysts predicted a 7 percent gain.
Perfume and cosmetics demand softened in Europe and China[6] in the third-quarter, Guiony said. New product introductions should help LVMH “do better in the last part of the year, which is awfully important for this business,” he said.
Growth accelerated however at the wines and spirits and watches and jewelry divisions, while the selective retailing unit, which includes the Sephora beauty chain and DFS duty-free stores, maintained its 19 percent growth pace.
To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net[7]
To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net[8]
[9] Louis Vuitton Store
People walk past a Louis Vuitton store, operated by LVMH Moet Hennessy Louis Vuitton SA, at Lotte Avenuel, Lotte Shopping Co.'s luxury brand department store, in Seoul.
People walk past a Louis Vuitton store, operated by LVMH Moet Hennessy Louis Vuitton SA, at Lotte Avenuel, Lotte Shopping Co.'s luxury brand department store, in Seoul. Photographer: Woohae Cho/Bloomberg
4:39
Oct. 15 (Bloomberg) -- Allegra Perry, managing director at Cantor Fitzgerald, discusses Burberry Group Plc Chief Executive Officer Angela Ahrendts's planned departure to Apple Inc. next year. She speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
References
- ^ Get Quote (www.bloomberg.com)
- ^ Get Quote (www.bloomberg.com)
- ^ London (topics.bloomberg.com)
- ^ Luca Solca (topics.bloomberg.com)
- ^ Get Quote (www.bloomberg.com)
- ^ China (topics.bloomberg.com)
- ^ Send E-mail (www.bloomberg.com)
- ^ Send E-mail (www.bloomberg.com)
- ^ Enlarge image (www.bloomberg.com)
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