Luxury goods group LVMH is optimistic about high-end spending in the United States but it struck a cautious note on the pace of recovery in the key Chinese market.
LVMH reported better than expected second-quarter sales, with robust U.S. growth and a recovery in Europe offsetting declining revenue in Asia, where lockdowns in China disrupted business.
The French company, which owns dozens of high-end labels ranging from Tiffany to Moet & Chandon, has tapped strong post-pandemic demand for its designer labels as socialising resumes and shoppers spend savings accumulated during the pandemic, brushing off concerns about turbulent stock markets and rising prices.
LVMH's sales rose 19% year on year to 18.73 billion euros ($18.95 billion) in the three months to June 30, beating analyst expectations for 17.13 billion euros in a Visible Alpha consensus cited by UBS.
But revenues fell by a "heavy double-digit" in China, the group's finance chief Jean Jacques Guiony told analysts as a result of COVID-19 restrictions imposed from mid-March.
He flagged some improvement in the Chinese market toward the end of the quarter, but said it was "nothing very significant", adding that store traffic in the country was still "well below" last year's levels.
"We are very optimistic with regards to the U.S. and a little bit 'wait-and-see' with regards to China," Guiony said, adding it was too early to say how strongly the Chinese market would rebound.
The group has seen no pushback from consumers after most labels increased prices by between 3% and 8%, Guiony said, adding he did not expect the group to make big moves on the pricing front in the second half of the year.
Operating margins in the fashion and leather goods division, which is led by Louis Vuitton and Dior, improved further in the quarter to reach 41.4%. Guiony said that kind of level, one of the highest in the industry, was "here to stay."
Sales in the wine and spirits division bounced back strongly from logistical and supply constraints earlier in the year, growing 30%, while selective retailing, which includes cosmetics brand Sephora, rose 20%.
The company's strong second quarter sets a benchmark for its rivals. Gucci owner Kering publishes first-half results on July 27, with Hermes reporting on July 29.
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