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LVMH reports flat profits in key areas—is the luxury sector struggling?

A shopper looks at the window display of a Louis Vuitton store, operated by LVMH Moet Hennessy Louis Vuitton SA.<meta itemprop="author" content="Balint Parneczi Photography

A Shopper appears at the window show of a Louis Vuitton retailer, operated by way of LVMH Moet Hennessy Louis Vuitton SA.

The Posh sector is dealing with identical headwinds because the airline trade, as terrorism in Europe has weakened demand with the aid of decreasing tourism and footfall.

“It has an affect, especially in Europe,” defined Gerst. “If the market is down, we expect maybe 1 to 2 p.c organic increase hit for the entire year. It Is an impression, however It’s manageable.”

Despite these uncertainties, Gerst felt LVMH was once an effective funding conserving.

“We in reality like the company, It Is very well managed in our view,” she stated. “It Is far more protective than people suppose: One third of the EBIT (earnings ahead of passion and tax) is coming from spirits and from cosmetics and in addition their watch business is outperforming the business.”

In The Meantime within the U.Okay., the vote for Brexit could have an effect on The Luxurious sector as shoppers are turning into weary of brands which market themselves on heritage and artisanship, In Keeping With Peter Maxwell, senior researcher at consultancy the future Laboratory.

“Native luxury brands that trade specifically on their British heritage will take in some of the damage finished to ‘Model Britain’ with the aid of the vitriol of the referendum and the global perception that the U.K. is now a less open, tolerant and steady nation,” he told CNBC by means of email.

“Patriotism has by no means been much less in vogue and championing the local now has the potential, rightly or wrongly, to be interpreted as jingoism by way of certain pro-Eu demographics.”

In Step With Maxwell, Europe is historically seen as the home of luxurious manufacturing and severing ties with the continent could have a bad effect on the image of British manufacturers among vacationers.

Disclosure: GAM holds LVMH shares in its portfolio.

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