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Arnault Confident in LVMH

America may be sliding into recession and Europe's economies stagnating, but LVMH Moët Hennessy Louis Vuitton boss Bernard Arnault on Thursday said he remains bullish on luxury.

PARIS — America may be sliding into recession and Europe’s economies stagnating, but LVMH Moët Hennessy Louis Vuitton boss Bernard Arnault on Thursday said he remains bullish on luxury.

Arnault told LVMH shareholders at the group’s annual meeting here that overall sales in the United States in April were strong — up double digits for Louis Vuitton — and that Asia continued to deliver “exceptional” results.

“We are in a position to meet our objectives for a sharp rise in earnings in 2008,” said Arnault, adding overall sales in April were growing in line with the first quarter’s double-digit performance.

Despite admitting the current economic environment “isn’t the best that we’ve known” and that the diving value of the dollar and yen was eroding profits, Arnault said LVMH would not stem its aggressive expansion and communications tactics as it tries to grow in a tough environment.

“Every time we’ve been [in a difficult economy] we’ve increased market share,” said Arnault at the morning meeting here, which was followed later in the afternoon with a Christian Dior shareholders’ meeting.

“We’ve started the year strong. We will not pull off [of the accelerator],” he said. “We are focused on innovating. There are tons of new leather goods — the Richard Prince bag for Vuitton has been an immense success and we won’t be able to meet demand. We can’t produce the pieces fast enough.”

As reported, LVMH’s first-quarter sales advanced 12 percent at constant exchange rates to 4 billion euros. After factoring in the negative impact of the strong euro against the dollar and yen, the firm’s sales growth was shaved to 5 percent.

Arnault promised shareholders “significant” growth in sales and profits this year and reiterated a pledge to double LVMH’s results and size over the next five years.

Projecting an easy and relaxed air, Arnault said LVMH’s so-called star brands, including Louis Vuitton, Dior and Tag Heuer, were key to driving further gains this year. He said investments would be focused on bolstering their business.

He also touted the “great potential” for Fendi, which he said in the next years was poised to become “one of the most important Italian brands on the market.”

Though LVMH last month acquired the fast-growing Swiss watch brand Hublot, Arnault told investors that he remained focused on “organic growth” and that the firm was not preparing to go on a buying binge. To wit: Arnault dismissed recent market rumors that he and Belgian financier Albert Frere were preparing a bid for Hermès.

“There are rumors like that every year,” he sniffed. “Hermès is a family controlled firm and we have no contact with the family.”

That said, Arnault allowed that LVMH might be in the market for more Swiss watch brands, which would further bolster its presence in the highly profitable high-end timepiece sector.

“We will concentrate on the brands we have,” said Arnault. “But there may be a few acquisitions in the watch business. We’re not number one [in watches] yet.”

Emerging markets, which have been offsetting tepid growth in more mature markets for many luxury players, garnered significant attention during Arnault’s rapid-fire presentation.

He pointed out LVMH has more than doubled its business in emerging markets in the last five years and the company was well positioned to continue to profit from further development in fast-growing economies around the world.

“The economy today is driven by emerging markets,” said Arnault, who added the lines at Vuitton’s new “maison” in Hong Kong often rivaled those at the brand’s flagship Paris store on the Champs-Elysées. “We feel less pressure [due to strong business in emerging markets],”

Arnault continued: “The growth has been impressive. Soon they will no longer be emerging markets but emerged.”

Arnault said LVMH now operated close to 450 stores in emerging economies, from Russia and China to Brazil and Ukraine. He attributed LVMH’s success in emerging markets to the fact that “we treat them like they are developed….Our success is explained by quality.”

But while Arnault emphasized the potential in countries like China and Russia, he said LVMH would not abandon more “traditional” markets.

“If we are strong in the U.S., France, Italy and Japan, we can be sure that success in emerging markets will follow,” he said. “The opposite is not true.”

LVMH’s stock closed up 2.45 percent to 76.85 euros, or $118.81 at current exchange.

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