By Cristina Roca

 

Luxury-goods conglomerate LVMH Moet Hennessy Louis Vuitton SE is reported first-quarter revenue on Thursday April 16. Here's what we watched:

 

SALES REVIEW: The owner of Louis Vuitton said revenue fell 15%, or 17% on an organic basis. Analysts at RBC, Bernstein and Jefferies said this was broadly in line with their expectations. The company warned at the end of March that its first-quarter revenue would fall 10%-20% as measures to stem the spread of the coronavirus hit its sales.

 

WHAT WE WATCHED:

-FIRST READ ON 1Q FOR LUXURY GOODS: LVMH was the first large luxury-goods company to report first-quarter revenue, thus giving an indication of what is to come from other sector players. LVMH's release wasn't worse than feared, and the company had some encouraging news on demand in mainland China. Still, investors need to keep in mind that stronger luxury-goods companies like LVMH will likely perform better against the coronavirus headwind, Bernstein analysts said, suggesting other companies could take a bigger hit from the virus.

-CURRENT TRADING IN CHINA LIFTS HOPES: LVMH shares rose sharply on the opening Friday, and JPMorgan Cazenove analysts believe management's comments around the recovery in demand from the all-important Chinese clientele had a lot to do with this.

LVMH management said sales for its biggest brands Louis Vuitton, Dior and Sephora started to grow in China in the second half of March and gathered speed in April. "In April, for the large brands, we've seen very high growth rates in mainland China," CFO Jean-Jacques Guiony said, "sometimes in excess of 50%."

This sign of Chinese customers' strong appetite for luxury following two months of lockdown offers hope to sector players. However, this surge doesn't completely compensate for the collapse of Chinese spending abroad, and JPMorgan Cazenove analysts warn that LVMH is likely outperforming most of its peers when it comes to lapping Chinese consumers' pent-up demand.

-DIVIDEND: The French company said it will cut its proposed dividend for 2019 by 30%, joining a growing number of companies that have reduced or cancelled their dividends amid the coronavirus crisis.

 

Write to Cristina Roca at cristina.roca@dowjones.com; @_cristinaroca

 

(END) Dow Jones Newswires

April 17, 2020 07:00 ET (11:00 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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