What's going on?
On Tuesday, the world’s largest luxury goods company, LVMH Moët Hennessy Louis Vuitton (no prizes for guessing its biggest brands), reported quarterly sales that were roughly what investors expected.
What does this mean?
Fashion (and leather – ooh er!) appeared to tickle the fancy of LVMH’s customers. Sales in the company’s fashion and leather segment grew by 14% compared to the same time last year, helping overall sales to grow by 11% – bang on estimates (excluding the effects of currency swings).
Chinese shoppers are important in the luxury sector, making up a third of global sales of luxury products. And more of the same from LVMH probably means it’s continuing to woo those customers. The company will be hoping its momentum continued during China’s recent Golden Week – a week-long (!), countrywide holiday.
Why should I care?
For markets: Where LVMH leads, others tend to follow.
LVMH is a bellwether of the luxury industry and investors often look to it for clues about what’s going on at other luxury companies like Kering (home of Gucci), Hermès (father of the $400,000 bag), and Richemont (Cartier’s riche owner). Last week, reports that Chinese travelers returning home were having their luggage checked for luxury goods bought abroad that might be subject to taxes rattled investors in luxury companies’ stocks. LVMH’s continued sales growth might help reassure them that Chinese customers are still shopping around the world nonetheless.
The bigger picture: Luxury conglomerates – move over for the new kid.
The world’s largest luxury companies are made up of several separate brands – besides Gucci, Kering owns Bottega Veneta and (Yves) Saint Laurent, to name a couple. Not too long ago, Michael Kors only had its eponymous brand to its name, but its acquisition of Jimmy Choo last year and Versace last month suggests it’s well on the way to mirroring its European rivals. However, according to some, it’s still got a long way to go.