LVMH reported strong revenue growth as the world’s largest seller of luxury goods defied the disruptions of war in Ukraine and the resurgence of the coronavirus disease 2019 (COVID-19) in China, a harbinger- potential racer for the rest of the industry.

First-quarter sales rose 23% on an organic basis to 18 billion euros ($19.5 billion), driven by LVMH’s largest unit, fashion and leather goods, the Paris-based company said on Tuesday. . Analysts had expected a gain of 17%.

Led by billionaire founder Bernard Arnault, LVMH is the first European manufacturer of luxury goods to publish its turnover for the period. The owner of Louis Vuitton and Dior was supported by resilient demand in the United States and Europe.

“The stellar 1Q highlights their geographic and business reach and lack of reliance on any one group, given the current trade disruption in China,” wrote Swetha Ramachandran, who manages the Luxury Brand. GAM’s Equity Fund, in response to a query from Bloomberg.

The stock rose 1.8% in early trading in Paris, reducing its decline this year to 12%. LVMH has a market value of nearly 322 billion euros ($348 billion).

LVMH’s organic sales in the United States and Europe increased by 26% and 45%, respectively, during the quarter. This compares to an 8% gain for Asia excluding Japan. The United States, meanwhile, generated about a quarter of the company’s revenue.

Revenue for LVMH’s fashion and leather goods unit jumped 30%, beating analysts’ forecasts of a 23% gain.

CHINA EFFECT
Still, the company said it is currently seeing a negative impact on demand for luxury goods due to shutdowns in China. In a call last Tuesday, Chief Financial Officer Jean-Jacques Guiony told analysts he was confident about medium to long-term demand in China once things return to normal.

“Investors are digesting the very strong first quarter performance, but also the uncertain outlook for China,” Bernstein analyst Luca Solca said by email.

The wine and spirits activity is the only division not to grow by double digits due to supply constraints, in particular for its Hennessy cognac, whose volumes fell by 18% over the period. LVMH partially offset lower volumes with price increases, Chris Hollis, who oversees investor relations, said on the call. Hollis said the first quarter tends to be volatile and a lesser period after the holiday shopping season.

The luxury industry has relied on price increases to offset inflation, and Mr Guiony said most of LVMH’s brands raised prices “significantly” during the period.

LVMH closed its stores in Russia on March 6 following the invasion of Ukraine, a dispute that could hurt consumers’ “feel good factor” when it comes to luxury shopping, according to Telsey Advisory Group. Russian nationals represent less than 1.5% of LVMH sales, according to Morgan Stanley. — Bloomberg