2ND UPDATE: LVMH Sales Rise 23% Confirming Luxury Recovery

French luxury goods company LVMH Moet Hennessy Louis Vuitton (MC.FR) Thursday reported a 23% jump in third-quarter sales, confirming a strong rebound for luxury products from champagne to high-end watches as the sector enters the crucial end-of-year period.

Sales for the world's largest luxury company in the third quarter rose to EUR5.11 billion from EUR4.14 billion a year earlier as all divisions posted double-digit growth. The figure beat analysts' expectations of EUR4.83 billion.

LVMH also expressed interest in acquiring companies in "the most promising markets."

Luxury companies are scrambling to expand in Asia, especially China, as the country's growth gives rise to a new wave of consumers seeking high-end goods.

Sales of LVMH's selective retailing unit which owns DFS, duty free shops in airports and the Sephora cosmetics chain, rose 24%, and the company said Asian tourism is on the rise. That's a positive sign for the sector as a whole, which generates a lot of business from travelers shopping abroad.

The wine and spirits division, closely watched this quarter for signs consumer demand has improved, posted a 24% rise in sales to EUR846 million. The division, which sells Veuve Clicquot champagne, suffered during the financial crisis but recently rebounded sharply as retailers began restocking their stores. This quarter shows end demand from consumers has also returned.

Watches and jewelry, another area that had suffered from destocking by retailers, also improved posting a 31% rise in sales to EUR244 million.

Sales in the fashion and leather goods division, home to luggage maker Louis Vuitton, which was one of the industry's top performers throughout the crisis, continued its brisk pace of growth, up 26% to EUR1.95 billion.

The quarter showed continued global growth, said Citigroup in a research note. "It is not just about Asia, but about global luxury demand," led by the company's star brands including Louis Vuitton and Tag Heuer, Citigroup said.

Analysts expect to raise their forecasts for the company following the strong quarter.

"LVMH deserves to trade at a premium versus the sector," said Dennis Weber of Evolution Securities, citing its market dominance and brand portfolio.

Luxury goods companies have been particularly cautious in calling a return to growth in the sector after the economic crisis abruptly ended years of fast growth. But LVMH is the second luxury goods company this week to sound an upbeat note about the sector's recovery.

The U.K. fashion retailer Burberry Group PLC (BRBY.LN) Wednesday increased its full year guidance for wholesale revenue in the second half after sales of watches and perfumes so far this year beat the company's projections.

LVMH said its performance so far this year "confirmed its confidence for 2010," as it enters the all important end-of-year period which accounts for a large proportion of annual sales with new-found assurance.

Shares in LVMH, the owner of fashion house Fendi and jewelry brand Chaumet, have risen 23% over the past six months, largely outpacing the Paris CAC-40 index, which declined 6% over the same period. Investor confidence in the sector has gathered speed in recent months.

At 0843 GMT LVMH's shares were trading up 0.2% at EUR110.10 compared to a 0.5% rise in the CAC-40 index.

LVMH's smaller French rivals PPR SA (PP.FR) and the leather maker Hermes International (RMS.FR) report third quarter sales Oct. 28, and Nov. 9 respectively.

By Mimosa Spencer, Dow Jones Newswires; +33 1 40 17 1773; mimosa.spencer@dowjones.com

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