(Bloomberg) -- LVMH’s sales of luxury goods to key Chinese consumers have kept growing rapidly despite a slump in the Hong Kong shopping hub caused by anti-Beijing protests.
The owner of Louis Vuitton and Christian Dior threw down a gauntlet to rivals with 19% third-quarter revenue growth in fashion and leather goods. Analysts had predicted a 15% gain on a comparable basis.
LVMH shares rose as much as 5.5% in Paris on Thursday, the most since January, and they’re up 45% this year. Gucci owner Kering SA and Cartier parent Richemont posted smaller gains.
The luxury leader’s strong performance allays some concerns about the effects of the Hong Kong disruptions, showing that the Chinese demand that is increasingly driving growth in the industry remains robust. The demonstrations against the tightening grip of China’s government in the city have curbed travel to Hong Kong by mainland consumers, but they’re still splashing out on high-end fashions elsewhere.
“We believe that the bulk of the Hong Kong weakness has been compensated in other markets,” Citi analyst Thomas Chauvet said in a note. “This sets the bar pretty high for peers.”
Total sales at the luxury conglomerate, which also makes Dom Perignon Champagne and owns cosmetics retailer Sephora, rose 11% to 13.3 billion euros ($14.6 billion), beating the 9% consensus estimate.
The overall gain masked weakness in Hong Kong, where August and September sales fell 40%, Chief Financial Officer Jean-Jacques Guiony said on a call Thursday, a day after the company’s report. While that will hurt LVMH’s profitability this year because of high fixed costs in the city, the company is confident business will recover eventually, he said.
“It’s out of the question that we would consider that Hong Kong will not be a strong business center in the years to come,” he said.
Elsewhere, the company is getting a boost from changes at its biggest labels. Christian Dior Couture has accelerated since the arrival of a new menswear chief, Kim Jones. The brand has reissued men’s versions of bestselling Dior products for women like Saddle bags and Bar suits.
Louis Vuitton, the company’s largest and most profitable brand, is raking in the buzz from increased online marketing spending. The label has also revamped its menswear under designer Virgil Abloh, known for his streetwear brand Off-White and work as a creative consultant to Kanye West.
Forecasts for the luxury giant’s growth were tempered as LVMH boutiques in Hong Kong became a backdrop for protests that spilled from the city’s streets to its airport and shopping malls. About 6% of the company’s sales were registered in Hong Kong dollars during the first half of the year, according to an interim financial report.
The protests have slammed a tourism industry that used to thrive on visits from mainland China, raising questions on the future of Hong Kong as a luxury hub. Hong Kong’s retail sales by value plunged a record 23% in August from a year earlier as demand for luxury goods such as jewelry and watches plummeted.
Mainland Chinese have been doing more of their shopping close to home as Beijing cut import duties, bringing down local prices, and cracked down on the widespread practice of returning home from overseas with undeclared purchases.
The protests are expected to speed up that trend. Still, analysts anticipate that most luxury brands will make up only around half of their lost Hong Kong sales elsewhere.
(Updates with CFO comments in seventh and eighth paragraphs)
--With assistance from Gregor Stuart Hunter.
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