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LVMH's painful upmarket move

Wednesday, October 16, 2013 - 01:46

Oct.16 - Shares in LVMH, the world's biggest luxury goods group, fell sharply after an unexpected slowdown in sales growth at its fashion and leather business, which includes the Louis Vuitton, Celine and Dior brands. Hayley Platt reports.

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They're the world's biggest luxury group but LVMH have just reported a surprise slowdown in growth. Sales growth at its fashion and leather business, which includes Louis Vuitton, Celine and Dior, slid to 3 percent in the third quarter. Expectations were for 7-8 percent. The news pushed its stock down more than 6 percent in early trade, wiping around 4.8 billion euros off the market value. The group blamed the slowdown on price increases in Japan and weaker demand for some brands, even though Japan only accounts for around 15 percent of LVMH's fashion and leather sales. Reuters BreakingViews Pierre Briancon says the problem lies with the company's decision to introduce a more upmarket range of handbags. SOUNDBITE: Pierre Briancon, European Editor, BreakingViews, saying (English): "The niche of bags of the $3,000 to $4,000 to $5,000 a piece type of bags that Hermes for example is doing and other fashion brands that are within the Kering the former PPR and Gucci neighbourhood is proving very profitable but also very competitive." The slowdown adds to the company's woes after the group's artistic director, Marc Jacobs resigned. SOUNDBITE: Pierre Briancon, European Editor, BreakingViews, saying (English): "It's unclear whether he left because there was a predicted slowdown in sales or because he didn't agree with the strategy, or because simply, as the company and he said, that he wanted to pursue other interests." The group also reported flattish sales of its fashion and leather ware in mainland China which accounts for around 12 percent of its business. Although trends in watches and jewellery showed a slight improvement.

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LVMH's painful upmarket move

Wednesday, October 16, 2013 - 01:46