Black Friday is Now! Don’t miss out on up to 60% OFF InvestingProCLAIM SALE

WRAPUP 1-Hermes, LVMH bring relief to luxury sector

Published 02/06/2009, 08:39 AM
Updated 02/06/2009, 08:40 AM
CFR
-
PRTP
-
BRBY
-
LUX
-

* Shares rise across luxury sector

* Hermes sees 2009 sales at 2008 level, excl currency impact

* LVMH says January sales went well, no 2009 outlook

(Adds details from FD interview, updates shares)

By Astrid Wendlandt

PARIS, Feb 6 (Reuters) - Europe's luxury industry drew some comfort on Friday from Hermes' relatively encouraging 2009 outlook, and a positive trading update from LVMH.

The news from the world's two biggest luxury groups by market value lifted the whole sector, battered in recent weeks by disappointing sales and growing evidence of restrained spending even among the ultra-rich.

Fresh figures from the pair showed upmarket handbags, shoes and other leather goods resisted consumer thriftiness better than jewellery, watches and certain spirits.

Hermes said it aimed to keep 2009 sales relatively constant against 2008. Many analysts expect the global luxury market to fall about 10 percent this year.

LVMH said January "was not a bad month" but declined to give any guidance for 2009.

Shares in Hermes rose as much as 8 percent, and were up 6.1 percent at 79.56 euros by 1308 GMT, valuing it at 8.4 billion euros ($10.8 billion), making it the world No. 2 behind LVMH.

The French CAC 40 index of blue-chip companies was up 0.4 percent, while the DJ Stoxx Personal and Household Goods index was up 1.6 percent. The Dow Jones Retail index was 0.7 percent higher.

LMVH shares were 7.4 percent higher at 47.67 euros, giving it a market capitalisation of 23.4 billion euros, while PPR, owner of luxury group Gucci, also saw its shares rise more than 6 percent.

The positive ripples reached Luxottica, whose shares were up more than 5 percent, even though the Italian eyewear group cut its 2008 earnings forecast.

Hermes and Louis Vuitton have been shining partly thanks to their trademark leather goods, but LVMH has been more exposed to the poor state of the jewellery and watch markets than Hermes.

Leather goods sales at Louis Vuitton likely rose between 6 percent and 7 percent during the fourth quarter, based on analyst estimates, while at Hermes they rose 8.7 percent.

Hermes said leather handbag sales jumped 14 percent during the period.

"We have seen a slowdown since October but we are still growing," Hermes Finance Director Mireille Maury told Reuters in an interview on Friday.

Most luxury groups, except for Tod's and Burberry, have published disappointing sales figures for the fourth quarter.

In January, Italian jeweller Bulgari and Switzerland's Richemont warned of a difficult 2009 and U.S. jeweller Tiffany issued its second profit warning in three months.

Hermes beat expectations with a 1.7 percent rise in sales at constant currencies in the fourth quarter, while LVMH said its quarterly sales were "about flat", without giving details.

"Fourth-quarter figures demonstrate that the resilience of the Louis Vuitton brand cannot be ignored when assessing LVMH investment risk versus other luxury companies, notably the watch players," HSBC said in a note.

The wines and spirits unit at LVMH, which also owns Krug champagne, Chopin vodka and Hennessy cognac, suffered particularly in the United States and Japan.

After reaching a peak in the first half of 2007 of more than 20-times current year earnings, average valuations in the European luxury sector have fallen to 2003 levels at about 9-times to 10-times this year's expected earnings.

LVMH is trading on about 11-times this year's earnings while Hermes is still on about 30-times due to its resilient profile and recurring takeover speculation.

Since Jan. 1, LVMH stock has fallen by 2 percent, Richemont by 11 percent, PPR by 8 percent and Hermes by 20 percent, all underperforming the DJ Stoxx Personal and Household Index, which has itself gained 4.6 percent. (Editing by Andrew Macdonald)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.