By  on January 20, 2005

PARIS — Luxury giant LVMH Moët Hennessy Louis Vuitton posted a strong finish to a banner year, achieving a 2.2 percent increase in fourth-quarter sales to 3.87 billion euros, or $5.03 billion, a 7 percent rise in organic terms.

“We are optimistic, and despite a challenging currency environment, we see no signs of our main markets slowing down,” finance director Jean-Jacques Guiony told analysts during a conference call Wednesday. “Our markets are strong, and we expect them to remain so.”

LVMH, which reports full-year earnings in early March, estimated its 2004 increase in operating income at 10 percent and cited its objective for 2005 as a “tangible increase” in profits. The company also said it would continue to focus on star brands and improve profitability, as seen in its planned disposal of money-losing Christian Lacroix to America’s Falic Group.

For the full year, group sales rose 5.6 percent to 12.63 billion euros, or $15.71 billion, an 11 percent organic rise. All dollar figures are at the average exchange rate.

LVMH said all business groups logged an increase, excluding the impact of currency.

Headlining strong holiday sales and a record December was a “close to double-digit” performance by the cash cow Louis Vuitton brand in the fourth quarter. Star products included accessories in multicolored or trompe l’oeil versions of its famous monogram, handbags in blueberry colored Epi leather and a line of timepieces with pink faces and watchbands.

Analysts had been alarmed by flat sales of Vuitton in Japan last year, but LVMH assured that sales to Japanese clients, who are now traveling more, continue to grow at a mid-single-digit pace. The company also noted a December surge in Vuitton sales in Japan helped offset slight declines earlier in the year.

“We are very optimistic for Vuitton in 2005,” Guiony said, while declining to commit to precise sales target for the year.

Perfumes and cosmetics were a blot on the figures, with fourth-quarter sales down 2 percent to 657 million euros, or $852.2 million. The company blamed a reorganization of its U.S. distribution, which included a 20 percent cut in doors selling Christian Dior products.On the plus side, LVMH cited a good performance of its new Dior Pure Poison and men’s L’instant de Guerlain fragrances and strong growth of BeneFit Cosmetics in the U.S. and the U.K.

Sales in the core fashion and leather goods division stood at 1.26 billion euros, or $1.64 billion, in the fourth quarter, a 9 percent organic increase. Besides Vuitton, LVMH trumpeted double-digit sales growth at Celine, Loewe, Marc Jacobs, Pucci and Berluti.

But while the company improved full-price selling for Donna Karan and Fendi by trimming distribution, which meant sales declines of anywhere from 10 percent to 20 percent last year, depending on the market. What’s more, “we have not yet completed the reorganization of the distribution,” Guiony said, forecasting further sales declines in 2005 at both brands.

He declined to pinpoint losses at Fendi last year but characterized them as “significant” and promised a “marked” improvement in profitability this year. As for Karan, “the break-even objective is met,” he added.

DFS and Sephora also showed continued improvement, thanks to a strong recovery in tourism after 2003’s SARS scare and rapid growth of Chinese tourism. Sales in the selective retail division rose 11.1 percent to 3.39 billion euros, or $4.2 billion, for the year, or 17 percent in organic terms.

Asked during a question-and-answer period if LVMH still considered these improved businesses non-core, Guiony demurred, saying, “I think you should ask [LVMH chairman] Bernard Arnault in March [during LVMH’s analysts’ conference].”

Still, he hinted LVMH might not be in such a rush to dispose of the division, stressing economic circumstances have changed, and both DFS and Sephora are “different companies” today. LVMH noted like-for-like sales at Sephora have been running above 20 percent for four consecutive years.

A streamlined watch and jewelry and jewelry division experienced a tough fourth quarter but finished the year with an 18 percent organic sales rise to 497 million euros, or $618 million.

Sales of wines and spirits increased 7.7 percent to 2.28 billion euros, or $2.83 billion, for the year, an 11 percent organic increase. Emblematic of a strong U.S. market, cognac and spirits sales were up 30 percent in the fourth quarter, LVMH noted.Wednesday’s results, largely in line with analysts’ expectation, were disclosed in Paris after the close of trading. Shares in LVMH gained 0.7 percent to close at 55.25 euros, or $71.83 at the current exchange, on the Paris Bourse.

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