LVMH sets high bar for luxury peers as it trumps revenue forecast

LVMH, the world’s biggest luxury goods company, reported higher-than-expected revenue growth for the third quarter on Monday, setting a high bar for peers after strong sales at its fashion brands.

LVMH, home to labels like Louis Vuitton, Christian Dior and Moet & Chandon champagne, said like-for-like revenues, which strip out currency swings and acquisitions or disposals, grew 12 percent from a year earlier to 30.1 billion euros (26.8 billion pounds).

That beat the 9 percent organic growth forecast in an analyst poll compiled for Reuters by Inquiry Financial and was stable from the previous quarter, in spite of a weaker showing by LVMH’s spirits unit and a tricky foreign exchange climate.

A strengthening euro risks putting tourists off spending in many European destinations, even as visitors return following a spate of attacks in Europe.

Revenue growth at LVMH’s spirits and wines division eased to 4 percent between July and September, from 6 percent in the previous three months, as supply constraints hit its cognac brand, Hennessy.

Rivals due to post trading updates in the coming weeks include fellow Paris-based conglomerate Kering - owner of Gucci - and standalone fashion houses such as France’s Hermes and Britain’s Burberry.

Luxury goods makers have enjoyed a revival in Chinese appetite for their watches, high-end clothes and handbags and expensive wines and whiskeys in the past year after an economic downturn that hit the industry hard.

Other headwinds on top of unfavourable currency effects still lurk, however. They include diplomatic tensions in Asia, a vital market, amid a stand-off between the United States and North Korea over the latter’s nuclear tests, which analysts say could make consumers in that region more cautious and affect tourist spending if the situation worsens.

“In an uncertain geopolitical and currency environment, LVMH will continue to be vigilant,” the group said in a statement.

LVMH, run by French billionaire Bernard Arnault, has ridden the sector’s recovery in part thanks to its wide array of brands in a luxury goods industry where clients can be notoriously fickle.

Fashion label Louis Vuitton, known for its branded-luggage, leather handbags and sought-after outfits, remains a star performer. LVMH has also recently fully integrated Christian Dior into the group, which boosted non-organic revenue in the third quarter and helped offset a negative currency impact.

Like-for-like sales in LVMH’s fashion and leather goods division as a whole were up 13 percent between July and September, unchanged from the growth posted a quarter earlier.