LVMH Slumps on Concern Over Fashion, Leather Goods Slowdown - San Francisco Chronicle

(Updates with luxury-goods shares from 12th paragraph.)

Oct. 16 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA^[1] , the world’s largest luxury-products maker, 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.

The stock dropped as much as 6.6 percent to 135.35 euros, the steepest decline since Sept. 22, 2011.

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 reported late yesterday, slowing from the first- half’s 5 percent gain and trailing the 6 percent median estimate of 11 analysts. Perfume and cosmetics growth also weakened, adding to concern over slowing industry growth and prompting share-price drops in rivals from Swatch Group AG to L’Oreal SA.^{[2] [3]}

“The market was expecting F&L trends to accelerate further given a much easier comparative, pricing effects and early signs of Vuitton’s repositioning,” said Thomas Chauvet^[4] , an analyst at Citigroup Inc.^[5] He estimates the fashion and leather-goods unit’s organic sales probably rose 3 percent last quarter with the Louis Vuitton^[6] brand’s growth at about 2 percent.

The slowdown “confirms our view that it will take time (likely at least another 12 months) for initiatives to bolster the leather handbag offer at Louis Vuitton to produce tangible results,” said Allegra Perry^[7] , an analyst at Cantor Fitzgerald.

Fewer Logos

Vuitton is slowing retail expansion, including more precious materials in its ranges and adding products with fewer logos in an effort to appeal to the wealthiest shoppers. In April, LVMH reported organic growth of 3 percent in first- quarter fashion and leather goods sales, the weakest performance since the fourth quarter of 2009.

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.

“The group will continue its proactive strategy centered on innovation and targeted geographic expansion in the most promising markets,” LVMH said in the statement.

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 and profit. It’s also shuffling Vuitton’s management, with Delphine Arnault^[8] joining as executive vice president and artistic director Marc Jacobs^[9] leaving after 16 years to focus on his own label.

Uncertain Environment

Total third-quarter revenue advanced to 7.02 billion euros ($9.5 billion) from 6.9 billion euros, LVMH said yesterday. 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.

Growth is slowing at LVMH as luxury-goods demand wanes globally. Burberry Group^[10] Plc, the U.K.’s largest luxury-goods maker, expects the business climate to remain “uncertain,” Chief Executive Officer Angela Ahrendts^[11] said yesterday as she announced her departure after almost eight years at the company.

Burberry fell as much as 2.1 percent to 1,433 pence in London today, extending yesterday’s 7.6 percent slide. Swatch Group dropped as much as 3.1 percent to 556.5 Swiss francs, Cie. Financiere Richemont SA slid as much as 2.9 percent to 89.5 francs and Prada SpA^[12] lost 3.7 percent to HK$75.95 in Hong Kong.

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.

Growth accelerated however at the wines and spirits and watches and jewelry divisions, while the selective retailing unit, which includes the Sephora^[13] beauty chain and DFS duty free stores, maintained its 19 percent growth pace.

--Editors: Marthe Fourcade, Thomas Mulier^{[14] [15]}

To contact the reporter on this story: Andrew Roberts^[16] in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

References

1. ^{^} LVMH Moet Hennessy Louis Vuitton SA (www.sfgate.com)


2. ^{^} Swatch Group AG (www.sfgate.com)


3. ^{^} L’Oreal SA. (www.sfgate.com)


4. ^{^} Thomas Chauvet (www.sfgate.com)


5. ^{^} Citigroup Inc. (www.sfgate.com)


6. ^{^} Louis Vuitton (www.sfgate.com)


7. ^{^} Allegra Perry (www.sfgate.com)


8. ^{^} Delphine Arnault (www.sfgate.com)


9. ^{^} Marc Jacobs (www.sfgate.com)


10. ^{^} Burberry Group (www.sfgate.com)


11. ^{^} Angela Ahrendts (www.sfgate.com)


12. ^{^} Prada SpA (www.sfgate.com)


13. ^{^} Sephora (www.sfgate.com)


14. ^{^} Marthe Fourcade (www.sfgate.com)


15. ^{^} Thomas Mulier (www.sfgate.com)


16. ^{^} Andrew Roberts (www.sfgate.com)