LVMH confident about growth amid resilient China demand

World
Europe

LVMH, the world's biggest luxury company, struck a confident tone for the year ahead on Tuesday after the Chinese market posted better-than-expected sales growth in the last quarter of 2018.

In the fourth quarter of 2018, the company's revenue rose nine percent, hitting 13.7 billion euros (15.7 billion U.S. dollars). Revenue for the full year was 46.8 billion U.S. dollars, up 21 percent from last year, a record high. Net profit in 2018 rose 18 percent to 6.35 billion euros.

Jean-Jacques Guiony, LVMH's chief financial officer, said spending by Chinese customers grew by double digits for most of the company's major brands in the quarter, and there was no sign of slowing down.

Luxury goods companies have been hit by worries about signs of slowing demand in China, their biggest market.

"We are confident for 2019, which got off to a good start," billionaire LVMH boss Bernard Arnault told a news conference on Tuesday.

"January is looking very good," he said.

The conglomerate, which owns some of the world's most valuable brands including Christian Dior and Givenchy and has snapped up rivals worldwide over the decades, is focusing on expanding its brands with big social media marketing investments and new designers.

LVMH and its rivals have relied on growing demand from young, middle class Chinese shoppers to lift sales and are betting that this trend will last even if the boom of the past two years eases.

Spending patterns are shifting, with some Chinese starting to buy more luxury goods at home rather than overseas due to import tax cuts and a falling yuan, though that has also raised concerns that shopping capitals like Hong Kong will lose out.

Other challenges include Britain's possible exit from the European Union without a negotiated deal.

LVMH said Britain accounted for only four percent of its sales, but added it had stockpiled four months' worth of wine and spirits inventory in the country to prepare "for the worst case scenario."