LVMH Rises After Biggest Profit Boost Since 2012

PARIS, France — LVMH Moet Hennessy Louis Vuitton SE rose in Paris trading after the world's largest luxury-goods maker reported its strongest earnings increase in three years.

First-half profit from recurring operations rose 15 percent to 2.96 billion euros ($3.3 billion) as sales of fashion and leather goods accelerated and the drinks unit returned to growth, the Paris-based company said late Tuesday. Analysts predicted 2.93 billion euros, according to the average of estimates compiled by Bloomberg. The shares rose as much as 3.7 percent.

LVMH recorded strong sales in Europe and the U.S., while the unit that includes handbag maker Louis Vuitton overcame declines from the brand in China, Macau and Hong Kong to post 10 percent growth in the second quarter, Chief Financial Officer Jean-Jacques Guiony said on a conference call. The earnings increase was the most since a 20 percent gain in the first half of 2012.

Improving trends at Vuitton confirm “the success of the brand’s repositioning strategy and prospects of a return to double-digit earnings growth in 2015,” said Thomas Chauvet, an analyst at Citigroup in London. He reiterated his buy rating.

The shares rose 2.9 percent to 170.60 euros as of 9:02 a.m. in the French capital.

Fashion and leather-goods sales increased at twice the pace analysts had predicted and accelerated from a 1 percent gain in the first three months. Vuitton’s sales in Japan and Europe are benefiting from a shift of business from China, Macau and Hong Kong, where they fell about 10 percent, Guiony said.

The CFO also said it's too early to confirm that rents will fall in Hong Kong even as LVMH holds talks with landlords there. Gucci owner Kering SA and other luxury companies are demanding lower store charges there to reflect the island city's waning appeal with wealthy Chinese shoppers.

Guiony’s comments on China and the growing calls for lower rents in Hong Kong weighed on shares of rival Prada SpA, which fell as much as 7.2 percent in Hong Kong to the lowest since January 2012. A block trade of about 0.8 percent of Prada’s shares exchanged hands.

LVMH’s second-quarter wine and spirits sales rose 5 percent, rebounding from a 1 percent drop, as U.S. demand for Hennessy cognac compensated for weakness in China.

By Andrew Roberts; editors: Matthew Boyle, Thomas Mulier, Paul Jarvis.