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UPDATE 2-LVMH says Vuitton Q2's comparable growth below Q1

Published 07/28/2009, 01:04 PM
Updated 07/28/2009, 01:08 PM
DGE
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* Louis Vuitton Q2 comparable sales below Q1

* LVMH emerging markets sales rose 7 percent in H1

* Diageo are not sellers of their Moet Hennessy stake

(Adds more details, analyst quotes, background)

By Astrid Wendlandt

PARIS, July 28 (Reuters) - French fashion brand Louis Vuitton, traditionally LVMH's most crisis-proof business, saw a slight drop in comparable sales in the second quarter from the first, the luxury giant said on Tuesday.

While enjoying strong demand in China and a sustained appetite from consumers in the United States and Europe, the fashion house saw worsened trading in Korea, affected by a drop in Japanese purchases.

Louis Vuitton, whose wares are designed by Marc Jacobs and advertised by the singer Madonna in glossy magazines, contributes more than half of LVMH's core profits and is one of the group's most important engines of growth.

"Asia was a bit lower (in Q2) than Q1 due to the fact that the Korean business, which was really booming in Q1 was less strong in Q2 with the Japanese travelling less," LVMH Finance Director Jean-Jacques Guiony told a conference call on results. "We had slightly lower organic growth at Vuitton in Q2 than in Q1, mainly due to the Asian business."

LVMH said Louis Vuitton enjoyed double-digit revenue growth during the first half on a published basis but declined to give comparable sales growth figures for the luxury brand on a quarterly basis.

"Region by region, Q2 was roughly comparable to Q1, particularly when it comes to Europe and to the US," Guiony said.

LVMH posted late on Monday a 12 percent drop in first-half operating profit on the back of flat sales, broadly in line with expectations.

The group said China was the main contributor to emerging market sales which rose 7 percent in the first half with emerging markets now representing about 30 percent of turnover.

LVMH, which also owns fashion brands Loewe, Fendi, Kenzo and Celine, said some fashion houses lost money during the first half but did not wish to say which ones.

Guiony said the group expected fashion collections for this fall and winter to mark a low point in terms of orders, as they were placed when the retail outlook was at its worst.

"We see winter fashion collections as a low point," he said.

While luxury companies are vulnerable to crises and events that can impact travel, Guiony said the group was not worried by worldwide outbreaks of swine flue.

MOET HENNESSY

Finally, Guiony said Diaego was not a seller of its 34 percent holding in LVMH's Moet Hennessy wine and spirits unit.

There was speculation earlier this year that the UK-based spirits group could make a bid for the rest of the Moet Hennessy shares it did not own. Other analysts suggested LVMH would want to acquire Diageo's holding.

"It takes two to tango. As far as I know Diageo are not sellers of their stake," Guiony said.

Moet Hennessy owns Dom Perignon, Veuve Clicquot and Ruinart champagne, Hennessy cognac and Glenmorangie Scotch whisky.

LVMH shares, which gained more than 2.8 percent in morning trade and 30 percent since the beginning of the year, closed down 0.3 percent at 61.11 euros.

The shares trade on a ratio of about 15 to 16 times this year's earnings, down from a multiple of more than 20 times reached two years ago during the peak of the luxury goods cycle.

"Its trough valuation versus history makes it an attractive stock against a prospect of more moderate luxury market growth medium term, on the back of lower macro-economic growth," Bernstein Research said in a note. (Editing by Greg Mahlich)

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