LVMH storms back with surge in first-quarter sales

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The Independent Online

LVMH, the world's largest luxury goods group, has signalled that its well-heeled customers are splashing the cash again with a surge in first-quarter sales.

The maker of Louis Vuitton handbags and Hennessy cognac attributed a 13 per cent jump in underlying sales, compared to consensus of 7 per cent, to distributors restocking following a slump in demand last year and a recovery in consumer demand for its products globally.

City analysts also cited its "excellent" performance in Asia and a "strong rebound" in the US and Europe.

The Paris-based company delivered double-digit underlying revenue growth across all its divisions, which it said was "even more remarkable when compared to the first quarter of 2009 which itself had shown strong growth".

Its best-performing two divisions were watches and jewellery, and wines and spirits, which delivered like-for-like sales growth of 34 per cent and 20 per cent respectively.

The Paris-based company attributed the "record organic revenue growth" at its watches and jewellery division to restocking by retailers and strong demand for brands, including its Tag Heuer watches and Chaumet jewellery. LVMH said: "The success of the new products presented at the Basel [Switzerland] Watch Fair this year confirmed the momentum of LVMH brands."

Total sales at the group jumped by 11 per cent to €4.47bn in the first quarter.

LVMH said its wine and spirits division, which makes Moet & Chandon and Ruinart champagne, benefited from a renewal in orders from distributors.

Melanie Flouquet, an analyst at JP Morgan Cazenove, said: "The biggest surprise stemmed from wines & spirits up 20 per cent organically on easy comps but a much higher restocking than hoped for. This division is critical to further margin expansion at LVMH as it suffered most in 09 and is a meaningful contributor to group profit."

Sales of Hennessy cognac were buoyed by the Chinese new year in Asia in February.

The group's delivery of underlying revenue growth of 13 per cent smashed City expectations of about 7 per cent.

Analysts at Citi said that following the "solid first-quarter performance" it expected the consensus for 2010 operating profit of €3.57bn at LVMH to "nudge up" by between 3 and 4 per cent.

The group's fashion and leather goods units also impressed with underlying sales up 10 per cent, lifted by continued strong demand for its Louis Vuitton bags. The company said: "Louis Vuitton continues to deliver an exceptional performance, sustained worldwide by the growth of its historic lines and by the success of its latest innovations."

However, LVMH said the outlook for the strength of the global economic recovery was "uncertain".