The title jumped more than 6% early Friday, as the fashion business of French luxury conglomerates returned to double-digit growth in the third quarter.
The company said its fashion and leather goods division’s revenue increased 12% year-over-year to $ 5.9 billion, thanks to strong performance from its Louis Vuitton and
His largest firm’s rapid return to double-digit growth shattered analysts’ consensus for a 1% drop and was welcomed by investors. The group’s turnover, however, fell 7% to 11.96 billion, with performance varying between the company’s units, with jewelry down 14%, cosmetics down 16% and wines and spirits down only 3% against a backdrop of a strong recovery in Hennessy cognac.
The encouraging signs of recovery observed in June for several of the group’s activities were confirmed in the third quarter in all regions, particularly in the United States, and in Asia, which again progressed over the period, LVMH said.
However, the company said economic and health uncertainties remained and it would continue to exercise caution in cost control and selective investments.
The update boosted the wider industry, as the owner of Gucci
up 3.9%, French peer
climbed 3%, and
The luxury goods sector was one of the first to be severely affected by the SARS-CoV-2 coronavirus outbreak, due to its exposure to China and other Asian countries where the virus was found. first widespread. Global travel restrictions have prevented tourists, including Chinese consumers, from visit fashion hot spots like London and Paris, which are generally a major source of income for LVMH and others. Sectors’ problems have only worsened with the spread of Covid-19 around the world, forcing manufacturing sites and stores in many countries to close for several months.
LVMH had a resilient second quarter but still reported an 84% drop in first half profits to 522 million. The third quarter results are a source of hope and encouragement, despite the disparity in performance between its divisions and the imminent threat of a second wave, especially in Europe.
The luxury group has also become involved in a legal row with
& Co. on their sour merger deal. The U.S. company filed a lawsuit against LVMH last month after the French conglomerate said it was pulling out of its $ 16 billion acquisition of the jeweler. LVMH then countered Tiffany, arguing that the company had been so badly damaged during the pandemic that the take-over agreement was invalid. LVMH said Thursday evening that the trial was scheduled for January 5.
Look forward. Bernstein analysts said the French company’s update showed a strong summer for luxury and that the best-in-class luxury brands were already in year-over-year growth mode. They maintained a buy rating on the stock with a target price of 475, down from 429.85 on Friday. We expect more players to follow this path, including Herms, they said, adding that high-quality names remain the best option for long-term investors.
The luxury goods sector was one of the first to be hit by the pandemic, but it could also be the first to emerge on the other side.
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