Paris, July 27 - LVMH, the world's biggest purveyor of luxury products, posted a 12 percent drop in first-half operating earnings on Monday, dragged down by its wine, spirits, watch and jewellery businesses.
Profit from recurring operations dropped to 1.36 billion euros ($1.94 billion) from 1.54 billion a year earlier.
Nine analysts polled by Reuters had an average profit estimate of 1.34 billion.
"(Profit) increased tangibly in the brands that control their distribution, like, for example, Louis Vuitton," LVMH said. "The brands distributed by third parties, on the other hand, suffered a massive destocking impact by these distributors."
The wines and spirits division recorded a 41 percent drop in profit, as champagne revenue was hurt by high stock levels at distributors, while earnings from watches and jewellery fell 73 percent, the owner of Dom Perignon champagne said.
Sales inched up by 0.2 percent in the first half to 7.81 billion euros, driven by gains at LVMH's fashion and leather goods business, including double-digit percentage sales growth at fashion house Louis Vuitton.
The group said it expected to continue to gain market share during the economic downturn thanks to a number of product launches planned before the end of the year, geographic expansion and cost management.
DEFENSIVE BRAND
"Reassured by the good resilience in the first half of the year, the group approaches the second half with confidence," LVMH Chief Executive Bernard Arnault said in a statement.
Societe Generale analyst Emmanuel Bruley des Varennes said, however, there were indications of a slowdown in organic growth at the fashion and leather goods division over the period.
"The market could keep in mind the decrease in internal growth in fashion and leather goods in the second quarter, despite the good performance in terms of margin, which remained practically stable," he said.
The division posted sales of 1.39 billion euros in the second quarter, down from 1.6 billion in the first, LVMH said.
Citi analysts "marginally" trimmed their full-year operating profit estimate for LVMH, "reflecting more conservative margin assumptions in Wines & Spirits and Perfumes, only partly offset by better prospects in Fashion & Leather," they wrote in a note.
"Louis Vuitton appears to be the most defensive brand in the industry," the Citi analysts added, confirming their "buy" rating on LVMH stock.
French luxury goods group Hermes said last week it still expected full-year sales to be flat and operating profit to fall slightly after demand for handbags and perfume led to a better-than-expected improvement in second-quarter trading.
British luxury goods group Burberry spoke earlier this month of a "challenging environment" as it posted a 4 percent fall in underlying fiscal first-quarter revenue.
Shares in LVMH closed down 2 percent on Monday at 61.30 euros. They have gained around 30 percent so far this year, giving the company a market value of over 30 billion euros.
The group plans to hold a conference call with analysts at 1300 GMT on Tuesday to discuss the results.
LVMH said its board would meet on July 29, when it would decide on a proposed interim dividend of 0.35 euros a share.