Louis Vuitton’s Owner Is a Well-Rounded Traveler

A Louis Vuitton store in Hong Kong


Kyle Lam/Bloomberg News

Investors tend to favor luxury brands that are popular with Asian consumers, but companies that also do well close to home have the best chance of hanging on to their plush stock market valuations.

LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury company by sales, released another set of strong quarterly results Wednesday afternoon after the end of European trading, extending a stellar run that began in late 2016. Sales increased by 12% over the three-month period through June.

Shareholders watching for any sign of weakening spending in Asia were pleased to see revenue growth of 18% in the region in the second quarter—a slightly higher rate than what LVMH managed in the first three months of the year.

Other areas were surprisingly robust given global trade tensions and moderate economic growth. Sales in Europe rose 13%, while shoppers in the U.S. and Japan also spent heavily. Investments in flagship brands Louis Vuitton and

Christian Dior

are paying off in legacy markets. LVMH hopes that Dior, which currently has an operating margin below 20% according to Jefferies analysts, will become a mare important profit generator in a few years.

The results show LVMH is doing a better job of balancing its dependence on Chinese shoppers than rivals are. China’s millennial luxury consumers are expected to drive much of the future growth in the sector. They spend an average of $6,000 a year on designer goods, helped by generous allowances from their parents, according to a recent McKinsey report. But too much exposure to one nationality is becoming a risk for brands such as


that are heavily targeting affluent young Chinese spenders.

Europe’s big luxury brands need more-balanced demand if they are to defend a record stock-market premium compared with U.S. luxury names that are more exposed to their domestic market. European luxury currently trades at a 100% premium to U.S. luxury on a projected earnings multiple, according to analysis by RBC, well above a historical 40% premium.

Meanwhile, LVMH’s share price is trading close to records. Keeping it there means pleasing shoppers at home as well as in Asia.

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