edf40wrjww2CF_PaperMaster:Desc
The past year has seen LVMH's sales buoyed by favourable economic conditions in two of its key markets - the US and China. Its wine and spirits division saw 12% organic growth for the first nine months of the year, while number of new product launches - such as the Miss Dior Cherie and Dior Addict 2 ranges - enhanced the consumption of its star brands. The group's fragrances and cosmetics division achieved 9% organic growth, while its fashion and leather goods division showed 12% organic growth for the nine-month period, as reinvestment into its smaller brands like Fendi began to deliver results.
More specifically, the company has benefited from strong economic growth in the US, which has led to increased sales of its high-end ranges such as the Hennessy Cognac brand. Indeed, such is the importance of the US market to the group that it recently purchased the rights from Brown-Forman Corporation to import and distribute the Glenmorangie malt scotch brand in the US.
LVMH expects to carry this momentum through to the fourth quarter and see its profits rise significantly from recurring operations over the course of the year. Given the tentative recovery of tourism in Europe as well as continued strong progress in Asia and the US, this prediction could well be on target. Furthermore, the continued resilience of LVMH's brands means it is well positioned to benefit from any upturn in European tourism spending.
Nonetheless, LVMH should beware of banking too much on any one market. Any downturn in US or Chinese consumer spending over the next two years would hit luxury goods manufacturers hard, demonstrating the need to maintain a wide geographical spread. European growth remains slow and LVMH should aim ...