Paris

LVMH's sales growth slowed at the end of 2019 after protests sapped the Hong Kong market while luxury-goods makers face another threat from the viral outbreak in China.

Sales rose 8 per cent on an organic basis in the fourth quarter compared with an increase of 11 per cent in the third quarter, Paris-based LVMH said on Tuesday. Analysts expected an 8.7 per cent increase, according to a Bloomberg survey.

The maker of high-end items ranging from Givenchy perfume to Veuve Clicquot Champagne has been riding high during a three-year boom led by Chinese customers. The momentum largely persisted through headwinds including a weaker yuan and slowing domestic growth. Concerns about the impact of the coronavirus epidemic originating in Wuhan, China, have prompted a sell-off in luxury stocks over the past week.

LVMH shares fell as much as 0.8 per cent on Wednesday.

Political protests in Hong Kong have dissuaded shoppers from visiting the long-time luxury hub for months. Anti-Beijing demonstrations particularly affected duty-free retailer DFS, LVMH said.

The outbreak of the respiratory illness has coincided with the Chinese New Year holiday, which is usually a high point for tourist shopping. Hong Kong on Tuesday announced curbs on travel from mainland China in an effort to contain the virus, which could act as a further drag on spending.

"Luxury thrives on people travelling, and on a limited number of global cities," wrote Luca Solca, an analyst at Sanford C Bernstein, who estimates that two-thirds of luxury consumption takes place in 25 cities, led by Paris, Hong Kong and New York. "Serious problems in any of the top luxury cities would be a sector headwind."

Italy's Salvatore Ferragamo SpA also said on Tuesday that it was hit by the turmoil in Hong Kong, with retail sales there falling more than 50 per cent from a year earlier in Q4. The company's overall sales for the full year also missed analysts' estimates.

"We're seeing an extremely strong and motivated response from China," LVMH chairman Bernard Arnault said in a Paris briefing Tuesday. "That reaction will have clear consequences in the fight against this epidemic."

Information he'd received suggests the peak should be reached over the coming weeks and the crisis may be partially resolved by the end of March, Mr Arnault said, cautioning that it may be inaccurate. "That's what we're hearing down here, it's probably wrong, but that's the information available to us," he said. "If it's resolved over the next two, two-and-a-half months, then it won't be all that bad. If it were to last two years, it would be a totally different matter."

LVMH's shares have risen more than 60 per cent over the past two years, increasing the company's market value above 200 billion euros (S$300 billion) and fuelling acquisitions including a US$16.2 billion deal to take over American jeweller Tiffany & Co. That purchase, the luxury industry's biggest to date, is expected to be completed mid-year.

The slightly downbeat end to the year took some of the shine off growth at Louis Vuitton and Christian Dior, LVMH's biggest fashion brands, which boosted the fashion division's profits 24 per cent for the full year. BLOOMBERG