(MENAFN- The Peninsula) Bloomberg
LVMH fell slightly short of the high bar the world's biggest luxury company has set for itself, as continued strong sales from the owner of Louis Vuitton bags failed to impress some investors.
The French company posted solid results for the second quarter in Europe, the US and Japan but suffered from a poor performance in China due to lockdowns. The shares slipped 2% early Wednesday.
Growth in the key fashion and leather goods division beat forecasts but was below some investors' expectations, based on recent discussions, RBC Europe analyst Piral Dadhania said in a note. The company has a history of beating forecasts by significant margins.
LVMH's diverse offerings -- from handbags to luxury hotel stays -- and global footprint are enabling it to withstand a worsening economic outlook. But there are some concerns after the latest update that momentum could slow.
Louis Vuitton is trying to boost profits by actively restricting entry-priced products such as the brand's classic monogram-coated canvas bags. Instead, it's promoting higher-priced leather handbags.
'The top end of the portfolio has done better than the entry price, but it's on purpose because we intend to rebalance the two,” LVMH Chief Financial Officer Jean-Jacques Guiony said about Vuitton's strategy during an analyst call.
Geographically, LVMH was helped by a 48% revenue recovery in Europe, followed by solid rebounds in Japan and the US. Asia, excluding Japan, barely grew during the quarter.
LVMH's outlook on the US economy isn't 'particularly gloomy and pessimistic,” Guiony said, citing recent quarterly performance. 'We're trying to manage the business for the growth it can generate.”
Should there be a downturn, Guiony said LVMH would react swiftly by cutting costs and store openings. Past experience, notably during the 2008 global financial crisis, has shown LVMH has a 'strong rebound capacity,” he added.
In China, store traffic is still 'way below” last year's levels, Guiony said, adding that LVMH is waiting to see how demand evolves there.
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