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Louis Vuitton owner LVMH’s sales growth slows in fourth quarter

Sales growth at luxury goods group LVMH slowed slightly in the fourth quarter, pushed down in part by a sharp drop in revenue in Hong Kong where months of violent protests have scared away many high-end shoppers.

The company, which owns labels including Louis Vuitton and Christian Dior, said the new coronavirus outbreak this month forced it to shutter some stores in the Chinese city of Wuhan, but it believed the peak of the virus would pass in a few weeks, limiting the impact on sales.

LVMH posted record revenue and profit for the whole of 2019. It said in a statement that fourth quarter sales rose 12% to 15.27 billion euros ($16.94 billion).

That marked an 8% increase year-on-year on a like-for-like basis, which strips out currency swings and acquisitions, and compared with forecasts cited by analysts and Reuters estimates of closer to 9% growth.

But it was less strong when set against like-for-like sales in the previous three months, which had grown 11%.

Speaking to reporters after the results were announced, LVMH Chief Financial Officer Jean-Jacques Guiony said that revenue in Hong Kong was down around 40 percent in the fourth quarter.

LVMH said though it managed to offset some of the pain through a strong performance at its stores in mainland China.

Hong Kong is a key market for luxury firms. Some of them have had to close stores during street protests against the Beijing-backed government.

LVMH said the group’s sales growth would have kept pace in the fourth quarter were it not for one-off factors. It cited a tax hike in Japan which had led clients to bring forward purchases to the third quarter, and cognac stock shortages in the last three months of the year.

Investors are fretting about the impact of the new coronavirus on China, the world’s second-biggest economy, amid travel bans and a Lunar New Year holiday that has been extended by the authorities to try to limit the spread of infection.

Asked for his projections, LVMH boss Bernard Arnault said it was too early to say how the virus would evolve.

Citing information passed to him from Chinese authorities, he said it seemed the peak of the virus should pass within weeks and it should peter out by the end of March. He also said the Chinese official response to the outbreak seemed robust.

In LVMH’s core fashion and handbags division, home to Louis Vuitton and other big brands such as Christian Dior, sales held up well in the quarter, expanding 15% on a like-for-like basis.

That was in line or a touch above some analysts’ forecasts.

(Production: Thierry Chiarello and Pascale Antonie)

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