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LVMH's luxury allure eclipses fears of trade war in China

Paris

LVMH survived the opening rounds of a global trade war as the Chinese consumer's appetite for French luxury goods surged during the second quarter.

Sales rose 11 per cent, the Paris-based owner of Louis Vuitton handbags and Sephora cosmetics said in a statement on Tuesday, beating analysts' expectations.

The world's largest luxury company reported double-digit percentage growth in sectors from fashion to jewellery and cosmetics.

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Its shares rose as much as 2.6 per cent in Paris early on Wednesday. The luxury conglomerate said it plans "numerous product launches" before the end of the year as it races to stay ahead of fast-growing competitors like Kering SA's Gucci and closely held Chanel.

Because of the threat of higher tariffs and other global economic uncertainties, "the current trends cannot realistically be extrapolated to the second half of the year", chief financial officer Jean-Jacques Guiony said on a call.

"Management sounded quite confident, despite ongoing concerns about Chinese demand and tougher comps," Raymond James analyst Hermine de Bentzmann wrote, adding that the result augured well for Kering.

Chinese consumers account for roughly a third of luxury purchases, according to consulting firm BCG - and as much as 70 per cent of the sector's growth. LVMH sales in Asia surged 17 per cent last year, and travelling Chinese shoppers lifted other markets.

Now, investors are watching carefully to see how long the boom can last for luxury's leader, especially as US President Donald Trump's trade moves risk shaking confidence in the industry's biggest client base.

"The threats are there but I don't think they have materialised yet in any way," Mr Guiony said.

Shanghai's CSI 300 stock index has fallen 11 per cent this year, fuelling fears that high-end shoppers could tighten their belts. China moved to bolster consumption by lowering import duties on many products earlier this month, and luxury brands including Louis Vuitton and Hermes have cut prices to pass the benefit on to consumers. BLOOMBERG

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