In a continuation of the growth seen throughout 2017, LVMH posted an impressive 13 percent growth in sales for the first quarter of 2018. Sales across the board for the company were up, including leather goods, perfume, watches, and fashion. It was initially expected that the company would post only a 9 percent growth in sales.
Chinese demand helped LVMH achieve an impressive 13 percent Q1 growth in sales, higher than the expected 9 percent
LVMH does not report individual sales numbers for its various brands, which include: Louis Vuitton, Dior, Fendi, Givenchy, Louis Vuitton, Guerlain, Hennessy, and Dom Pérignon. However, the company is expanding manufacturing of its “high-margin handbags,” indicating confidence in future sales.
In fact, fashion and leather goods saw a Q1 2018 growth of 25 percent, with watches and jewelry and perfumes and cosmetics growing by 9 percent and 8 percent respectively.
Last year, LVMH’s leather goods saw year-over-year growth of 13 percent, reaching approximately $19.09 billion (15.5 billion euro) in revenue.
28 percent of LVMH’s revenue in 2017 came from Asia (excluding Japan)
Growth in Asia, particularly China, is the most significant driver of this growth, which is LVMH’s largest market. 28 percent of the company’s revenue came from Asia (excluding Japan) in 2017.
Moreover, Asia’s share of revenue for wine and spirits has remained steady at 22 percent for 2016 and 2017, while overall revenue increases. Asia’s share of fashion and leather goods and perfumes and cosmetics respectively grew by 1 percent reaching 29 percent and grew by 2 percent reaching 30 percent.
This further points to growing Chinese demand for products in these categories as a driver of sales growth going into 2018.
Macro concerns about a trade war and a stronger euro could prove problematic
Still, there are concerns that a trade war between the United States and China could lead to a sharp drop in sales via alterations of tariff laws. 2017 also saw the euro strengthen against the yuan. This seemingly did not lead to a drop in sales, but nonetheless could dampen spending by Chinese tourists abroad in the year to come.
The continued growth of demand for LVMH, and other luxury goods within China itself, could prove to ameliorate some of these concerns and make the company less dependent on the rapidly changing landscape of Chinese outbound tourism.