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LVMH sets upbeat tone for luxury as China demand rolls on

[NEW YORK] LVMH set an upbeat tone for the luxury industry, ploughing ahead with double-digit sales growth that beat analysts' estimates for the start of the year.

First-quarter sales rose 13 per cent on an organic basis, the Paris-based owner of Sephora and Christian Dior said Monday after Paris markets closed. Analysts had estimated 8.5 per cent, projecting growth to taper off after a 12 per cent jump last year.

Prosperous Chinese consumers have been stocking up on LVMH's Louis Vuitton handbags and Givenchy makeup, powering record sales last year for the company with the highest market value in France. Gucci owner Kering SA and Birkin bag-maker Hermes International benefited, too. While China's economic growth is expected to slow to 6.5 per cent in 2018 versus 6.9 percent last year, according to forecast data compiled by Bloomberg, but the strong sales show that demand for luxury products remains high.

"This is a remarkable start to the year for LVMH, with broad-based market share gains in a buoyant environment for luxury goods," said Rogerio Fujimori, an analyst at RBC Europe who rates the shares the equivalent of buy, in a note to clients.

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With more than 4,000 stores from Paris's Avenue Montaigne to Los Angeles's Rodeo Drive, LVMH is getting a boost from a rising Chinese middle class that is travelling more than ever. It's also gaining from a push into e-commerce and new products to entice young consumers - like luxury sneakers and iPhone cases styled like Louis Vuitton trunks.

LVMH highlighted its digital efforts, such as its sponsorship for a startup accelerator that aims to encourage entrepreneurs developing new technologies and services for the luxury industry. The program is situated in Station F, a former Paris terminal that telecommunications billionaire Xavier Niel has turned into a sprawling campus for startups.

"Digital allows us to reach the client more quickly and directly," said Bernard Arnault, LVMH's chairman and France's richest man, speaking at an inauguration ceremony for the accelerator. "Innovation and creativity are fundamental values for LVMH." LVMH moved to ramp up its e-commerce business across its stable of brands last year with new sites for its Celine handbags and Berluti shoes, the first online store in China for its largest brand, Louis Vuitton, and a new multibrand emporium called 24 Sevres.

"We've really seen progress across the board," Chief Digital Officer Ian Rogers said in an interview, pointing to the online openings as well as increased engagement on social-media platforms like Instagram and China's WeChat.

The company saw organic growth of 10 per cent or greater in categories such as spirits, fashion goods, cosmetics and jewelry.