LVMH Shares Surge as Fashion Brands Overcome Asian Blues

PARIS, France — LVMH shares gained the most in a year after results beat estimates on demand for Louis Vuitton bags in Japan and Europe, providing some relief for a beleaguered luxury-goods industry.

The stock rose as much as 7.4 percent to 155.9 euros in early Paris trading, the biggest intraday advance since Feb. 4, 2015.

A better-than-expected fourth-quarter performance in fashion and leather-goods provided a highlight for LVMH, which is benefiting from a broad spread of goods covering Celine dresses, Moet and Chandon champagne and Christian Dior perfumes. That helped compensate for a slowdown in the watches & jewelry unit, where sales were hurt by a slump in Asian demand that caused Swiss rival Swatch Group AG to report earnings that missed estimates.

“When the environment gets tough, the highest-quality companies like LVMH tend to stand out,” Rogerio Fujimori, an analyst at RBC Capital Markets, said in a note. “In the present environment, LVMH shares deserve to re-rate versus peers given its relative defensive growth profile.”

Profit from recurring operations advanced 16 percent to 6.61 billion euros ($7.2 billion), Paris-based LVMH said Tuesday after markets closed. Analysts predicted 6.5 billion euros, according to the average of 27 estimates.

‘Strong Progress’

Fourth-quarter revenue rose 5 percent on an organic basis, topping the 3.9 percent estimate, thanks to “strong progress” in Europe, the U.S. and Japan, it said. The company’s flagship label Louis Vuitton is growing again after a revamp and had a “remarkable year,” the company said.

Fashion and leather-goods is LVMH’s largest division, accounting for more than a third of sales and more than half of earnings before interest and tax. Quarterly sales at the unit that includes brands such as Fendi, Celine and Givenchy rose 3 percent, beating estimates for growth of 1 percent. The watches and jewelry division also posted a 3 percent gain, although that was well below the 8 percent expected by analysts.

On a conference call, LVMH Chief Executive Officer Bernard Arnault expressed confidence that the group can continue to outperform its luxury sector peers in the upcoming year, despite an "uncertain" business climate.

By Paul Jarvis; editor: Matthew Boyle.