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LVMH’s Banner Quarter: Bags and Watches Drive 10 Percent Gain in Sales

LVMH reported a 9.8 percent rise in first-quarter sales and was upbeat about 2005, citing demand for designer handbags and luxury watches

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PARIS — Life is a bowl of cherry-printed handbags for LVMH Moët Hennessy Louis Vuitton.

The French luxury giant reported a 9.8 percent rise in first-quarter sales to 3.08 billion euros, or $4.04 billion at average exchange rates, and voiced optimism for 2005, citing lusty demand for its designer handbags, luxury watches and liquors, particularly in the U.S. and Asia.

“We believe we are entering a more stable economic environment,” finance director Jean-Jacques Guiony said during a conference call late Wednesday.While acknowledging a still unfavorable currency situation, the luxury group highlighted a sustained recovery in global tourism and reiterated its goal of a “tangible” increase in operating profits for the full year.

The Louis Vuitton brand continued to bear fruit, with double-digit organic growth led by demand for monogrammed leather goods customized with smiling cherries by Japanese artist Takashi Murakami.

Guiony told analysts initial deliveries of the bags in early February sold out rapidly, but had a “significant” impact in the first quarter ended March 31. He added that Vuitton expects its multipocket “Manhattan” bag and denim renditions of its iconic monogram to fuel sales in the second quarter and beyond.

Analysts were pleasantly surprised to learn of double-digit organic growth for Vuitton in Europe, which has been plagued by weak consumer sentiment.

Still, Asia emerged as the top-performing region for Louis Vuitton and other divisions, with group sales there up 27 percent in euros in the quarter. “This region continues to be a key source of growth for the group,” said Chris Hollis, LVMH’s director of financial communication.

The U.S. also remained a bright spot, with group sales rising 14 percent in dollars, led by its selective retailing, watches and jewelry, and wines and spirits divisions. U.S. sales in the core fashion and leather goods division registered a comparatively meager 6 percent uptick, which LVMH blamed on a “weak” and “erratic” January when customers increasingly devoted time to returning holiday gifts rather than shopping.

Worldwide, sales in the fashion and leather goods division rose 6.4 percent to 1.14 billion euros, or $1.49 billion. Stripping out the impact of currency and changes in perimeter, the increase stood at 10 percent.

LVMH cited a good start to the year for Celine, Marc Jacobs, Pucci and Berluti, its fastest-growing fashion franchises. It also highlighted double-digit sales gains for Fendi within its store network. However, sales at Donna Karan fell 10 percent in the quarter, reflecting the closure of outlet stores.

Wines and spirits registered the biggest increase, up 18.6 percent to 510 million euros, or $669.3 million, but the figures were boosted partly by the additional revenues from the acquisition of the Glenmorangie whisky brand.

Reflecting what it called a “true recovery” in the watches and jewelry sector, LVMH said sales in that division rose 8.9 percent to 122 million euros, or $160.1 million. In organic terms, the increase stood at 21 percent, reflecting double-digit growth for its Tag Heuer and Zenith brands, particularly in the U.S., Asia and France.

Sales rose 6.5 percent to 506 million euros, or $664.1 million, for perfumes and cosmetics and 12.7 percent to 823 million euros, or $1.08 billion, for selective retailing.

In the latter division, LVMH highlighted robust sales at its new DFS store in Okinawa, Japan, and across its Sephora chain of perfumeries, with U.S. like-for-like sales up almost 30 percent and Europe posting double-digit gains for the first time.

Separately on Wednesday, Christian Dior SA, parent of LVMH and the Christian Dior fashion house, reported first-quarter sales largely in line with the luxury group.

Christian Dior said sales of its fashions and leather goods increased by 7.4 percent to 146 million euros, or $191.6 million, or 9 percent at constant exchange. Asia, excluding Japan, and the United States led demand, with sales in the quarter increasing 25 percent and 20 percent, respectively

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