Luxury stocks skyrocket in Europe as LVMH sales rebound – Update 2
By Stacy Meichtry
PARIS – Shares in the luxury sector in Europe hit record highs on Wednesday after LVMH Moët Hennessy Louis Vuitton SE reported a strong rebound in sales in the first quarter, defying the effects of the pandemic on the global economy.
Buyers in China and the United States, where rapid vaccine deployment has led to easing restrictions, are fueling strong demand for leather goods at Louis Vuitton, Dior and other brands owned by LVMH. LVMH sales reached 14 billion euros, or $ 16.75 billion, in the first three months of 2021, up 30% from a year earlier, removing the effect of currency fluctuations and of its acquisition of the American jeweler Tiffany. First-quarter sales were 8% higher than the same period in 2019, before the pandemic.
LVMH’s status as a spokesperson for the luxury industry helped push the sector’s shares to all-time highs on Wednesday. LVMH stock rose 3.2% to 614 euros, parent company Gucci Kering SA 2.7% to 644 euros and Cartier owner Compagnie Financière Richemont SA jumped 3% to 96.68 francs Swiss.
LVMH’s market value topped € 300 billion this week for the first time, bolstering its status as Europe’s most valuable company, ahead of consumer goods giant Nestlé SA and pharmaceutical company Roche Holdings AG, as well as the oil majors and the banks of the continent.
The pandemic is accelerating a change in stock market fortunes as luxury overshadows sectors that were once at the heart of the European economy. Banks are struggling to adapt to new post-financial crisis regulations. Automakers are grappling with new regulations aimed at reducing carbon emissions. Big oil companies are subject to the vagaries of turbulent energy markets.
LVMH, which owns 75 brands, has created a mass market for luxury goods by selling products with a price range that can attract consumers who vary in age and income. Louis Vuitton sells leather goods starting at a few hundred dollars as well as handbags that cost thousands. A bottle of Hennessy cognac, meanwhile, sells for as little as $ 25.
When the pandemic gripped Europe last year, a freeze on international travel worried investors that the luxury sector was heading for dire straits. LVMH and other luxury giants have long relied on tourist traffic from fashion capitals around the world to drive sales. Chinese shoppers who once arrived by bus have disappeared from shops in Paris and Milan. Since then, the slow rollout of vaccines in Europe has resulted in the return of lockdown restrictions in France, Italy and other parts of the continent.
LVMH, however, has largely succeeded in ignoring the impact of the pandemic in Europe thanks to its expansion into China and the U.S. In recent years, the luxury giant has made efforts to expand its e-commerce operations and to open new stores in China and beyond, which is less dependent on Europe.
LVMH said its first quarter sales in Asia, excluding Japan, were up 86% from the same period last year and 26% from the first quarter of 2019. In the United States, sales increased 23% from the first quarter of 2020 and 15% from the first three months of 2019.
“There was clearly an advantage to accelerating US demand supported by a recent stimulus,” analysts at Hamburg-based Berenberg Bank wrote.
Louis Vuitton and the other LVMH brands are also better able to withstand economic turmoil as they specialize in handbags and other leather goods less sensitive to fashion trends. Excluding currency fluctuations, sales of LVMH’s fashion and leather goods division rose 52% year-on-year to € 6.7 billion in the first quarter.
The company’s wines and spirits unit, which includes Hennessy cognac and Moët & Chandon champagne, recorded a 36% increase while its jewelry and watchmaking business grew by 35%, removing the effects of the acquisition by Tiffany.
–Olivia Bugault contributed to this article.
Write to Stacy Meichtry at [email protected]
(END) Dow Jones News Wire
April 14, 2021 10:22 a.m. ET (2:22 p.m. GMT)
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