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LVMH fashion and leather division disappoints in first quarter

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(Globalpost/GlobalPost)

By Astrid Wendlandt

PARIS (Reuters) - LVMH <LVMH.PA> reported the lowest quarterly sales growth since 2009 on Monday at its fashion and leather division dominated by Louis Vuitton, the world's biggest luxury brand by sales.

The world No.1 luxury goods group, which also owns Hennessy cognac and champagne leader Moet & Chandon, achieved a revenue rise of 3 percent at its fashion and leather unit in the first quarter, below the 5 percent expected on average by analysts.

The last time sales growth at the division was that low was four years ago after the collapse of Lehman Brothers and as the U.S. financial crisis hit luxury goods spending.

The unit accounts for the bulk of LVMH's profits.

"This will be the focus area for everybody," one London-based analyst said about the division, declining to be named.

Other analysts noted, however, that the comparative basis for the division was high. Sales growth last year reached 12 percent in the first quarter, 8 percent in the second quarter and 5 percent in the third and fourth quarters.

Also, the group said at the time of its annual results in February that it planned to slow down Louis Vuitton's global expansion to preserve the brand's exclusive image and move its products more upmarket.

While the move was seen resulting in slower growth in the short term to benefit the brand longer term, some analysts still expected the volume slowdown to have been compensated by an 8 percent price increase in Europe last autumn and a 12 percent hike in Japan in February.

Overall, LVMH's first-quarter sales rose 7 percent on a like-for-like basis to 6.947 billion euros (5.93 billion pounds), slightly above the average estimate of 6.904 billion in a Reuters analyst poll.

The group said it had strong growth in Asia and the United States but noted the economic environment remained challenging and uncertain in Europe. The quarterly performance was in line with previous trends seen in the second half of 2012, it added.

"For me, the sales growth of the wines and spirits division is a little bit better than expected," said Marc Willaume, an analyst at Raymond James in Paris. Organic growth at the unit was 7 percent.

The group's travel retail unit, DFS, also benefited from slightly higher-than-expected comparable sales growth, coming in at 17 percent, while many analysts had forecast a 15 percent rise.

"DFS recorded an excellent performance driven by the continued growth in Asian tourism despite a decline in expenditure from Japanese tourists resulting from the weaker Yen," LVMH said in a statement.

LVMH is due to hold a conference call for analysts and investors on Tuesday at 1400 BST.

(Editing by James Regan)

http://www.globalpost.com/dispatch/news/thomson-reuters/130415/lvmh-fashion-and-leather-division-disappoints-first-quarter