Harbingers of Rebound? LVMH, Burberry Report Improving Sales Trends

Luxury perked up Tuesday as LVMH posted lower, but improving, third-quarter sales and Burberry logged a 17 percent rise in first-half revenues.

During the first half Burberry opened three stores and the company remains on schedule to open six more during the second half

During the first half, Burberry opened three stores and the company remains on schedule to open six more during the second half.

Photo By WWD Staff

PARIS — Evidence of a second-half comeback by the luxury sector continued to mount Tuesday with better results from LVMH Moët Hennessy Louis Vuitton and continued strength from Burberry.

LVMH recorded a 3.3 percent decline in third-quarter sales, but the figures for the three months were stronger than the 8 percent decline registered in the nine months, an indication of the recent pickup in sales. Excluding the effects of currency fluctuation, sales for the year-to-date rose 3 percent, LVMH said.

The numbers checked out at Burberry as sales during the first half rose 17 percent, with a 25 percent increase logged in retail sales.

The parade of European luxury numbers is expected to continue today as analysts ready themselves for second-quarter results from Gucci Group that are expected to show relatively stable sales but a double-digit dip in profitability.

Antoine Colonna, luxury analyst at Merrill Lynch in Paris, said there’s been a pickup in several key drivers of the luxury sector: global economic growth, consumer confidence and the “feel-good factor,” plus the appreciation of the yen. All of these factors bottomed out in the second quarter.

Data for September are mixed, he cautioned, but “should continue to improve. The travel flow data we get are constantly improving.”

Colonna also noted that the outlook generally is better for makers of “soft” luxury products like leather goods, whereas watchmakers have been hit by a weak dollar and high gold prices.

Burberry’s results reinforced the positive view of the luxury sector by Melanie Flouquet, analyst in charge of European luxury goods coverage at J.P. Morgan in London.

“There have been positive signs in the luxury goods sector since June, and there has been a visible pickup in Asia — excluding Japan — and the U.S.,” she said. “In the U.S. and Asia, there has been a strong local demand, while the Chinese traveler spending money in Hong Kong has also helped. But overall, Japanese tourist flows are still below last year’s levels.”

However, with the SARS epidemic, global terrorism and military action in Iraq no longer dominating the consumer psyche, purchasing by the affluent and the acquisitive appears to be returning to pre-9/11 levels, if not necessarily those of the late Nineties.
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