Posted on: Sunday, July 18, 2004

Luxury sales boost LVMH, Burberry

By Mark Deen
Bloomberg News Service

LVMH Moet Hennessy Louis Vuitton SA and Burberry Group Plc will probably point to Asian tourists and U.S. consumers as leading growth in luxury fashions and accessories this week, when they both are expected to report quarterly sales gains of about 10 percent.

Sales at LVMH, the world's largest luxury goods maker, rose 10 percent in the quarter ended June 30, according to the median estimate of 11 analysts surveyed by Bloomberg News Service. Burberry, known for its beige plaids, will report a similar gain, analysts said.

Asian travelers are snapping up perfumes and handbags in airport stores from Hong Kong to Hawai'i, and their U.S. counterparts, buoyed by an economy growing at its fastest pace in two decades, are helping boost demand at luxury stores, analysts said. That's helping the $74 billion (60 billion in euros) industry emerge from the worst slump in a decade.

"The drivers of growth have definitely been Asia and the U.S.," said Scilla Huang Sun, who manages $60 million in funds at Clariden Bank in Zurich. "Tourism is a big part of that and one of the questions is whether travelers are also starting to come back to Europe," said Huang Sun, who holds shares of both companies.

The shoppers are back one year after concern about the SARS virus and the Iraq war triggered an industrywide slump.

LVMH's sales probably rose to 2.70 billion euros in the second quarter from 2.44 billion euros a year earlier, according to the survey. Sales probably rose 16 percent before the impact of currencies and divestments, the analysts said.

The Paris-based company hasn't fixed a date for the revenue report, though it normally publishes second-quarter figures before the end of July.

Growth at the company, whose products range from Tag Heuer watches to Dom Perignon champagne, survived the industry slowdown thanks to demand for its Louis Vuitton handbags. Now sales may also be picking up at the company's DFS duty-free store unit, which has lagged other parts of the business, analysts said.

Travel has "improved over the past few months, in particular ... (the flow) of Chinese travelers to Hong Kong and Japanese travelers to Hawai'i," Melanie Flouquet, an analyst at JP Morgan Securities in London, said in a note to clients. "We expect LVMH to report very strong second-quarter sales."

She has an "overweight" rating on the stock.

LVMH may also give a preliminary estimate for first-half earnings growth, as it did in the past two years. Operating profit probably rose between 14 percent and 20 percent in the first six months of 2004, five of the analysts said.

The French company is also benefiting from sales in the United States after opening a flagship Vuitton store on New York's Fifth Avenue in February and extending its Sephora chain of cosmetics stores to most major cities around the country, analysts said.

The U.S. economy grew at a 3.9 percent annual pace in the first quarter and 62 economists surveyed by Bloomberg expect it to expand by 4.6 percent in 2004, the fastest pace since 1984.

Similarly, British fashion company Burberry is benefiting both from U.S. demand and sales to Asian travelers.

The company will probably say sales gained 11 percent in the three months through June as it added goods including pink trench coats and opened stores in cities such as Las Vegas and Houston.

Excluding currency movements and acquisitions, Burberry's sales rose about 16 percent, according to the median forecast of three analysts surveyed by Bloomberg News. That's similar to a 15 percent increase in the previous half year.