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.

Kent said Morgan Stanley expects sales at the Gucci division to fall 5.7 percent as a 10.7 percent negative currency effect erases a 5 percent increase in organic growth. Strength in leather goods would pave the way for “a substantial improvement” in first-quarter sales, which dropped 13.7 percent.

Speaking on condition of anonymity, one analyst noted that the negative effects of aggressive markdowns, high communications expenses and increasing losses at YSL will hurt the bottom line.

Lehman Brothers forecast a 16 percent decline in earnings before interest, taxes and appreciation to $60.9 million, or 52 million euros, although the bank added in its report that “results may be lower than expected due to the high level of volatility in the quarter, owing predominantly to a difficult travel environment and to currency.”

Group sales are seen coming in 1 percent higher at $684.7 million, or 585 million euros, while sales at the Gucci division are seen growing 1 to 8 percent excluding foreign exchange effects, according to Lehman Brothers.

“On a geographic basis, we expect Gucci division revenue to reflect double-digit growth at constant exchange rates in both Japan (10 percent) and the U.S. (16 percent) and we expect Europe to post a 3 percent decline due to the impact of low tourism on the region,” said the bank.
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