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Business

France luxury brands saw boosted sales from pre-tax demand in Japan

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An Hermes shop in Paris. The theme of Hermes for 2014 is "metamorphosis."   © Reuters

PARIS -- France's Big Three luxury brands all saw their sales grow in the first three months of this year, buoyed in part by a surge in demand in Japan prior to the consumption tax hike in April.

     But there were notable differences in the earnings performances of the three high-end brand empires.

     Sales of Moet Hennessy-Louis Vuitton, or LVMH, picked up 4% during the quarter, as its efforts to revitalize its core brands paid off. Hermes International did even better, ringing up double-digit sales growth for the first time in three quarters.

     In contrast, Kering, previously known as Pinault-Printemps-Redoute or PPR, posted a modest 1.2% rise in sales due to a poor performance of its sports and lifestyle unit.

     LVMH notched up 7.2 billion euros ($9.89 billion) in sales. Its core clothing and leather products business rebounded, with an 11% spike in sales, thanks mainly to Nicolas Ghesquiere, the former Balenciaga designer recruited as the new artistic director of women's collections at Louis Vuitton. The unit's healthy sales expansion offset an 8% fall in sales at the liquor unit of the conglomerate.

     In China, an anti-luxury campaign launched by President Xi Jinping depressed sales of cognac as gifts during the Lunar New Year shopping season. LVMH's perfume and cosmetics business logged a 1% increase in sales, while its watch and jewelry unit saw its sales remain flat. But the group's duty-free sales grew 5%.

     By region, LVMH's sales showed strong growth in North America and Asia, especially in Japan, where demand jumped prior to the rise in the consumption tax rate to 8% from 5% in April.

Continuing interest

Kering racked up 2.39 billion euros in sales during the three months. Sales of its high-end products as a whole rose by a healthy 5.1%, but its sports and lifestyle unit suffered a decline of 6.3%, continuing the downtrend in sales.

     By brand, sales of Kering's mainstay Gucci brand sagged 3.2%, but Saint Laurent recorded a 24.2% spurt in sales. Bottega Veneta also performed brilliantly, with a 9.5% spike in sales.

     Some other brands of the group, including Stella McCartney and Alexander McQueen, also shined, contributing to the overall performance of the conglomerate.

     Kering's sales increased in both industrial and emerging countries in a well-balanced global revenue growth trend.

     Sales growth was particularly remarkable in Japan due to the surge in demand before the tax hike and strong sales in the entire Asia-Pacific region.

     Kering has just restructured its luxury product businesses, setting up new sections like the couture and leather products unit and the watch and jewelry unit. The reform is aimed at securing sales expansion through efforts more tailored to the characters of individual brands.

     At Gucci, Kering CEO Francois-Henri Pinault directly supervises operations to revitalize the flagging brand.

     Hermes sold 943.5 million euros worth of products in the first quarter of this year. Its sales in Europe, Asia-Pacific (excluding Japan) and the Americas rose by 7.5%, 12.8% and 12.9%, respectively. Sales in Japan increased by 5.8% in terms of euros, relatively modest because of the yen's weakness, but soared 21.7% after adjusting for exchange rate changes. It was the sharpest sales growth in any region, including the entire Asia-Pacific region, where sales shot up 17.7%.

     By business category, Hermes' leather and harness unit enjoyed a healthy 10% sales growth, while the clothing and accessories business posted a 14.3% jump in revenue. Sales of its silk and textile operations and jewelry and furniture unit increased by 9% and 12.4%, respectively. But its watch business suffered a drop of 4.8% in sales, dragged down by a decline in China.

(Nikkei) 

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