* LVMH 3Q sales sending a positive signal ■ Nice beat on 3Q sales at LVMH. Headline revenue number of €9,138m came 2% ahead of our and consensus forecasts (source: Bloomberg). The implications for soft luxury and beauty are overall positive while hard luxury continues to be weak. The conference call is tomorrow at 3pm CET.
* Volumes in soft luxury seem to have held up well in 3Q. Organic sales for the key Fashion & Leather goods division were up +5% in 3Q against market expectations of +2%. Similar to 1H, we reckon the discontinuation of some DKNY lines had a c.2ppt drag on sales. Our pricing analysis of Louis Vuitton monogram handbags across four markets shows no price increases in the last 12 months. This suggests that growth in 3Q has been mainly volume driven. The read-across is particularly positive for Kering (N) reporting on 25 Oct with Gucci sales likely to outperform peers.
* The beauty assets still support group organic growth. Perfumes & Cosmetics grew organic sales by +10% and Selective Retailing by +8%. This confirms our view that the beauty business is helped by a favourable product mix towards cosmetics and market share gains in beauty retailing for Sephora (see Adding colour to cosmetics published on 07-Sep-16).
* Hard luxury remains the weak point. Organic sales for the Watches & Jewellery division were up +2%. It does not look bad in the context of the overall industry but it highlights two elements. First, unlike most other Swiss brands, Tag Heuer is back to growth thanks to successful inventory cleanup and price repositioning. Second, jewellery continues to be weak as we reckon Bvlgari sales in 3Q were down despite market share gains.
* Hennessy volumes remained positive in 3Q. We estimate cognac sales were up +2% in volumes, slowing from +13% in 1H but against much tougher comps. Champagne sales volumes were up +3% in the first nine months, therefore in line with 1H