LVMH Second Quarter Sales Up 11 Percent

PARIS, France – LVMH reaped the benefits in the second quarter as China's surging appetite for fancy French products remained untouched by the fight over tariffs and currencies.

Profit from recurring operations was €4.6 billion ($5.4 billion) for the first half of 2018, an increase of 28 percent. Group net profits increased 41 percent, reaching €3 billion ($3.5 billion), while operating margin hit 21.4 percent.

Sales rose 11 percent to €10.9 billion ($12.7 billion), the Paris-based owner of Louis Vuitton handbags and Sephora cosmetics said in a statement Tuesday. Analysts had predicted €10.79 billion. The world’s largest luxury company reported double-digit percentage growth in sectors from fashion to jewellery and cosmetics, and first-half profits were boosted by rapid growth at Vuitton and the exit of a duty-free concession at the Hong Kong airport.

Chinese consumers account for roughly a third of luxury purchases, according to consulting firm BCG — and as much as 70 percent of the sector's growth. LVMH sales in Asia surged 17 percent last year, and traveling Chinese shoppers lifted other markets. Now, investors are watching carefully to see how long the boom can last for luxury's leader, especially as US President Donald Trump's trade moves risk shaking confidence in the industry's biggest client base.

The "buoyant environment" of the first half of the year was "marked by unfavourable exchange rates and geopolitical uncertainties," LVMH said in the statement. "LVMH will continue to pursue gains in market share through the numerous product launches planned before the end of the year."

Shanghai’s CSI 300 stock index has fallen 11 percent this year, fuelling fears that high-end shoppers could tighten their belts. China moved to bolster consumption by lowering import duties on many products earlier this month, and luxury brands including Louis Vuitton and Hermès have already cut prices to pass the benefit on to consumers.

LVMH's competitors have thrown down the gauntlet in recent months. Kering SA's fast-growing Gucci brand set a midterm sales target that would rival estimates for Louis Vuitton, long the world's largest luxury brand with more than €9 billion in annual sales. Closely held Chanel released its yearly financials for the first time in 108 years — at the same time as Vuitton's most recent fashion show — to reveal that its sales of quilted leather handbags and No. 5 perfume had already bested Vuitton by some measures.

In a bid to keep its edge, LVMH has reshuffled the creative leadership at its biggest fashion brands in recent months. Designer Hedi Slimane, who set the menswear agenda for more than a decade with skinny jeans and suits at Dior Homme and Kering's Saint Laurent, has been tapped to add menswear and haute couture at LVMH's womenswear brand Céline, with his first shows this fall. New menswear chiefs at Vuitton and Christian Dior both made their debuts in June.

By Robert Williams, with additional reporting from BoF; editors: Eric Pfanner, John J. Edwards III, Thomas Mulier.