LVMH Eases Fears of a Luxury Slowdown in China

(Bloomberg) -- LVMH sees no letup in global demand for luxury goods as Chinese high rollers keep snapping up Louis Vuitton bags and Hennessy Cognac.

The bullish outlook from the French fashion giant came after it reported fourth-quarter sales that beat analysts’ expectations and raised its annual dividend by 20 percent -- signs that a boom fueled by Chinese consumers persists, at least for now.

“While I won’t give any numbers, the year so far is going in a very good direction,” LVMH Chief Executive Officer Bernard Arnault said at a news conference, even though he cautioned that the good times can’t last forever.

LVMH’s update contrasts with signs of weakness in China among companies ranging from Apple Inc. to Caterpillar Inc. to Nvidia Corp. amid an economic slowdown and a trade war with the U.S. Even as shoppers in the world’s biggest luxury market scale back on mundane purchases, they still have the means to splash out on the finer things.

LVMH reported strong demand for wines and spirits in China, but its fashion and leather-goods division was the standout performer in the quarter, with a sales gain of 17 percent. That unit is considered a bellwether for luxury rivals such as Gucci owner Kering SA and Prada SpA.

Shares Gain

Shares of LVMH rose 0.4 percent to 259.75 euros on Tuesday in Paris, before the report. They gained 5.2 percent last year, compared with a decline of 13 percent for the S&P Global Luxury Index.

In an interview with Bloomberg TV, Arnault warned that the boom won’t run on indefinitely, even for an industry that’s gotten used to double-digit growth rates. Sounding a customary note of caution, he said he foresees a recession in the next two to three years, though not in 2019.

In the meantime, high asset prices are creating challenges for a company that’s grown by making acquisitions as well as building sales of existing brands. Most recently, LVMH branched out in a new direction, agreeing to add high-end hotelier Belmond Ltd. in a $2.6 billion deal in December.

Now the company is eyeing other avenues for growth -- including a possible expansion of its collaboration with singer Rihanna, with whom LVMH already has a makeup venture. WWD has reported that they’re considering launching a luxury house under her name, building on the Fenty Beauty by Rihanna makeup label.

“Rihanna is an exceptional singer,” Arnault said at the press conference. “I adore her. Surely we may have some ideas,” he added, though there’s nothing concrete to report at this stage.

©2019 Bloomberg L.P.