LVMH reports 2016 record profits

LVMH, the world’s biggest luxury group, posted record revenue and profits for 2016 which beat expectations thanks to strong sales in the United States and Europe and a pick-up in demand in Asia.

Chairman and chief executive officer Bernard Arnault thought the first half of 2017 should be “relatively easy” for the group, but warned that tougher year-ago comparisons and uncertainties ranging from the impact of Brexit to the new Trump administration could make the second-half “more difficult”.

He also said stocks of its cognac and Louis Vuitton products are running low and could curb growth this year.

“My sentiment for 2017 is one of caution. When everything is going so well, one must be very vigilant,” Bernard Arnault told a news conference.

The group, whose key brands include Louis Vuitton, Dior, and Hennessy cognac, said 2016 profit from recurring operations rose 6 percent to €7.03 billion (£6 billion), beating the €6.8 billion median estimate in a Reuters poll of 12 analysts.

Fourth quarter sales rose to €11.27 billion, a like-for like growth of 8 percent, above analysts’ estimates for 5.6 percent growth.

LVMH’s fashion and leather division, which accounts for the bulk of its sales and profits and is home to the Louis Vuitton, Fendi and Givenchy brands, had like-for-like revenue growth of 9 percent in the fourth quarter — above forecasts of 5 percent.

Its wines and spirits division also reported a 7 percent rise in sales, helped by good growth in the US and a rebound of cognac sales to China and other Asian markets.

“Hennessy cognac is a great success and stocks are now at their lowest levels, so this could slow our business,” Arnault said.

LVMH’s rivals in the luxury industry, such as Cartier owner Richemont and British luxury brand Burberry, have also signalled better demand in mainland China and improving tourist spending in the last part of the year.

Several analysts expect the luxury goods sector to benefit in 2017 from improved consumer sentiment in China, tax cuts under the new Trump administration and robust Middle Eastern demand due to higher oil price.

Growth in the luxury goods market had shown signs of a slowdown, notably in the second half of 2015 after attacks in Paris put off tourists travelling to Europe, where many luxury brands make a significant proportion of their sales.

Global spending on luxury goods by tourists was up in December for the first time since February, lifted by strong business in Britain and France, a study by tax-refund services firm Global Blue showed