Profits fall at luxury goods giant LVMH

Waning demand for Hennessy cognac and Louis Vuitton handbags saw first-half profits at LVMH fall 5 per cent to €2.58bn (£3.47bn). Sales at the Paris-based luxury giant rose 3 per cent to €14bn, missing analysts’ forecasts.

Its drinks business, Moët Hennessy, was hit by weaker demand for cognac in China caused by the government crackdown on gift giving and ostentatious spending.

It said the wines and spirits division recorded a decrease in organic sales of 1 per cent in the first half.

Its leather goods business was hit by slower sales from Chinese shoppers, particularly in Hong Kong, as well as a decline in Japan in the second quarter due to a VAT hike that has also hit other luxury brands.

The group has been changing its flagship Louis Vuitton brand to stop it from becoming too common and has upped prices.

It reported “strong creative momentum” at the brand with its new artistic director, Nicolas Ghesquière. It said he received an “enthusiastic response to his first show”. The group has also been focusing on expanding its Fendi fashion label to ease the reliance on the Louis Vuitton brand.

Rahul Sharma, analyst at Neev Capital, said: “First-quarter leather goods sales were up 9 per cent and the second quarter looks down slightly, much worse than expected.”

Bernard Arnault, chairman and chief executive of LVMH, said: “The results of the first half demonstrate LVMH’s excellent resilience, thanks to the strength of its brands and the responsiveness of its organization in a climate of economic and financial uncertainties.”

Other areas of the business have thrived and its Selective Retailing arm, which includes cosmetics chain Sephora and its perfume businesses, reported organic revenue growth of 9 per cent.