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Louis Vuitton bags have more fans post-lockdown

Shoppers, especially those in Asia, are increasingly returning to buying luxury accessories after the easing of covid-19 restrictions

Models presented the Louis Vuitton Spring-Summer 2022 ready-to-wear fashion collection in Paris on 5 October.
Models presented the Louis Vuitton Spring-Summer 2022 ready-to-wear fashion collection in Paris on 5 October. (AP)

LVMH’s sales growth eased from the previous quarter, when purchases of Louis Vuitton bags and other luxury items surged after stores reopened from lockdowns.

Organic revenue at the fashion and leather goods unit rose 24% in the third quarter from a year earlier, the company said in a statement. Analysts had expected a gain of 21%. In the second quarter, sales in that key division had more than doubled from a year earlier, when stores were mostly shut during the first wave of Covid. 

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LVMH said after the close of trading Tuesday that it’s confident the current growth will continue. The shares rose as much as 2.2% Wednesday in Paris.

The French company is one of the first luxury groups to report this quarter, and its results suggest the industry’s growth remains on track as the pandemic eases its grip, even if the pace slows. Before the latest figures, analysts cited concern about potential demand disruption in China amid a virus resurgence and government plans to reach “common prosperity” through income regulation and redistribution.

LVMH doesn’t expect this new policy to be detrimental to the upper-middle class that forms the bulk of its customer base in China, chief financial officer Jean-Jacques Guiony told analysts during a call, adding it could be even be positive for sales. “We’re not particularly worried,” he said. 

Asia, excluding Japan, was LVMH’s biggest region at the end of September, accounting for 36% of sales. The US ranked second, contributing a quarter of revenue.

LVMH’s sales update should “reassure” investors, Thomas Chauvet, analyst at Citigroup said in a note, citing resilient growth in the high-margin fashion and leather goods unit and the improved trends in September in Asia and China after a slowdown in August. 

The fashion and leather division grew 38% on a 2-year basis in the third quarter after growing 40% in the previous quarter.

Third-quarter organic revenue growth came in at 18% at the watches and jewelry unit. Analysts expected 23%. Sales of this unit, which has included Tiffany since January, were “soft” in Asia in August amid virus restrictions but improved in September, Guiony added.

Still, momentum for Tiffany was “particularly strong” in the US, financial communications director Chris Hollis said during the call. The label, known for its robin’s egg blue packaging, launched a campaign during the period featuring rapper Jay-Z and his wife Beyonce performing the song Moon River, associated with the 1961 movie “Breakfast at Tiffany’s.” 

Overall, LVMH’s nine-month sales of 44.2 billion euros ($51 billion) have surpassed 2019 levels.

Guiony added that LVMH is experiencing an increase in shipping costs which the group can absorb thanks to its solid margins. He said the group’s drinks division, and particularly cognac, is facing some inventory constraints in the U.S. The situation in China is the opposite, with some excess inventory that should be absorbed in the fourth quarter, he predicted.

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