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LVMH first-quarter sales miss forecasts, says France remains weak

The logo of French luxury group LVMH is seen at the company headquarters in Paris
The logo of French luxury group LVMH is seen at the company headquarters in Paris, France, France, February 23, 2016. REUTERS/Jacky Naegelen

PARIS (Reuters) - Luxury goods industry leader LVMH (LVMH.PA) on Monday posted first-quarter sales below forecasts as tourist shopping in key markets such as France and Hong Kong remained low.

Comparable sales growth at the group's fashion and leather division, which includes the Dior and Louis Vuitton brands and generates the most revenue, was flat during the period, falling short of market expectations of 2-3 percent growth.

The unit had seen sales rise by around 3 percent in the previous two quarters.

"The US market is strong and Europe remains well oriented except for France which is affected by a fall in tourism," LVMH said in a statement. "Asian markets are varied but Japan continues to progress."

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LVMH, which owns more than 60 luxury brands including Hennessy cognac and Guerlain perfume, generated first-quarter sales of 8.62 billion euros (6.9 billion pounds), below Thomson Reuters' mean forecast of 8.72 billion euros.

"Overall, this is not very surprising, as LVMH and LVMH fashion and leather goods are so big that they can be seen as a proxy of the luxury goods sector – and the luxury goods sector is on the back foot," said Exane BNP Paribas analyst Luca Solca.

Last week, consultancy Bain & Co forecast the luxury market would reach a low point this year, due to lower levels of tourists travelling to Europe, spooked by militant attacks, depressed trading in Hong Kong, weaker demand in China and a relatively subdued U.S. market.

On Friday, Italian luxury goods maker Prada (1913.HK) reported a 27 percent fall in quarterly profit, hit by lacklustre sales in China which have waned alongside slowing economic growth and a crackdown on conspicuous spending.

One bright spot, however, was LVMH's watches and jewellery division, which has been through difficult times due to weak demand in China.

Its like-for-like sales grew 7 percent, against 3 percent the previous quarter, helped by the success of Tag Heuer's repositioning and connected watch as well as solid demand for Bulgari jewellery.

(Reporting by Astrid Wendlandt; Editing by David Goodman and Jane Merriman)