PARIS (Reuters) – Recovering sales of Louis Vuitton handbags helped LVMH LVMH.PA contain the fallout from the coronavirus crisis in the third quarter, as the world’s biggest luxury goods group reported a smaller-than-expected drop in revenues.
LVMH has like peers been hurt by the pandemic, and the French conglomerate has also hit the headlines as it seeks to walk away from its planned acquisition of U.S. jeweller Tiffany TIF.N in the midst of the crisis.
But LVMH has proved more resilient than some of its smaller peers, despite travel restrictions and store closures that have affected the whole industry, and its shares are only down 3% since the beginning of the year.
On Thursday, LVMH said its overall comparable sales fell 7% in the third quarter, beating analysts’ average forecast for a 12% fall, with revenues coming in just under 12 billion euros ($14 billion).
Its fashion and handbag division in particular set a high bar for rivals including Gucci-owner Kering PRTP.PA, after sales swung back into positive territory and rose 12% like-for-like, which strips out acquisitions and currency changes.
The division is home to Vuitton and Christian Dior, which dominate revenues, but Chief Financial Officer Jean-Jacques Guiony said the performance of other labels like Loewe, Celine and Fendi had also improved.
“The update confirms our impression of a strong summer for luxury goods,” Bernstein analyst Luca Solca said in a note, adding other top brands including Hermes HRMS.PA will likely have benefited.
Resurging sales among Chinese customers in particular, after China emerged from its coronavirus lockdown before much of Europe, also helped, Guiony said.
“China turned positive in the third quarter at Vuitton,” he told an analyst conference call.
LVMH, which owns and beauty chain Sephora and travel retailer DFS, did not escape all pain, however. Its revenues were down 21% like-for-like in the first nine months of 2020 as a whole.
In the third quarter, comparable sales at the retailing division – the most exposed to travel flows – plunged 29%, while sales of perfume and cosmetics dropped 16% and watches and jewellery, where it rivals Tiffany, fell 14%.
The wines and spirits unit, home to its Hennessy cognac brand, fared a little better, with sales down 3% in the three months to the end of September.
LVMH’s $16 billion acquisition of Tiffany, announced before the pandemic erupted, ran into trouble last month when the French group said it could no longer complete the deal.
It cited a French political intervention preventing it from doing so, but also what it described as the jeweller’s “dismal” performance.
The two sides are facing off in a Delaware court, with Tiffany seeking to force LVMH to honour the deal.
Earlier on Thursday, Tiffany unexpectedly published preliminary results, saying its sales have been rising through October as its business rebounds from pandemic lows. It added it expected fourth-quarter sales to fall by under 10%.
LVMH, which has refuted accusations that it deliberately stalled the transaction and is pressing ahead with antitrust filings, said in its release that it expected to receive approval for the deal from European authorities in October.
Reporting by Silvia Aloisi and Sarah White; Editing by Mark Potter