PARIS — LVMH Moët Hennessy Louis Vuitton posted a 25 percentincrease in first-half profits, confirming the strength of the luxurysector amid booming global demand for high-end goods such as leatherhandbags and luxury watches.
“We approach the second half of theyear with confidence and are relying upon the creativity and quality ofour products as well as the effectiveness of our teams to pursue furthermarket share gains in our historical markets as well as in highpotential emerging markets,” stated Bernard Arnault, president and chiefexecutive officer of the French luxury conglomerate.
The firsthalf was marked by LVMH’s $6 billion deal to absorb the Roman jewelerBulgari, which was cleared by the European Commission last month. In aconference call with analysts, LVMH chief financial officer Jean-JacquesGuiony said the luxury group had also increased its stake in rivalluxury firm Hermès International to 21.4 percent in the first half fromthe 20.2 percent it declared last December.
For the six monthsended June 30, net profits rose to 1.31 billion euros, or $1.84 billion,from 1.05 billion euros, or $1.39 billion, a year earlier. Currencyconversions were made at average exchange rates for the periods to whichthey refer.
Revenues rose 13 percent during the period to 10.3billion euros, or $14.4 billion, from 9.1 billion euros, or $12.1billion, in the same period last year, said LVMH, whose brands rangefrom Celine and Givenchy in fashion to Tag Heuer watches and cosmeticsretail chain Sephora.
LVMH said it would pay an interim dividendof 0.80 euros, or $1.15 at current exchange, on Dec. 2.
Thebetter-than-expected figures follow strong first-half results from otherEuropean luxury brands. Hermès reported a 17.9 percent rise in sales inthe second quarter, while revenues at Burberry increased 30 percent inits fiscal first quarter. French retail-to-luxury group PPR couldreinforce the trend when it reports first-half profits and sales Friday.
LVMHagain declined to provide specific earnings or sales guidance for theyear as a whole. “Our main markets are well oriented and we see noevidence of a slowdown, be it in Asia or in the U.S. The Europeanmarkets have proven so far this year a bit softer, but we expect bothdomestic consumption and touristic flows to hold up,” Guiony said.
TheLouis Vuitton brand continued to power ahead, with waiting lists for anumber of products, remaining the star performer in the fashion andleather goods division. The segment’s sales rose 13 percent in the firsthalf, helped also by sustained revenue and profit growth at Fendi andDonna Karan, and the strong development of Celine under artisticdirector Phoebe Philo.
Revenues increased in all geographicalregions with strong gains recorded in Asia and the United States. Inlocal currencies, sales in the first half rose 26 percent in Asia, 17percent in the United States and 8 percent in Europe, LVMH said.
Salesin Japan were down 6 percent in the wake of the earthquake, tsunami andnuclear crisis that struck the country in March. Guiony said sales offashion and leather goods in Japan increased in June following adouble-digit drop in the first quarter and a 1 or 2 percent decrease inthe second quarter. “We saw two or three months being deeply affected bythe disaster, and things coming back to normal thereafter,” he noted.
Grouprevenues rose 9 percent in the second quarter, a slowdown from the 17percent sales increase recorded in the first three months of the year,LVMH reported. It said second-quarter sales totaled 5.04 billion euros,or $7.26 billion, up from 4.63 billion euros, or $5.9 billion, in thesame period last year.
In organic terms, meaning withlike-for-like structure and at constant exchange rates, revenues were up15 percent in the first half.
Guiony said there was a negativeimpact of 1.4 percent stemming from currency fluctuations and thedisposals in 2010 of Champagne maker Montaudon and La Brosse et Dupont, amaker of beauty and personal care products.
“We started the yearwith a positive currency impact which shrank and reversed as the dollarsoftened and went away from last year’s level,” he said. “The currencyimpact should be significantly negative for the rest of the year ifcurrencies stay where they are today.”
By division, sales duringthe period were up 30 percent for watches and jewelry; 17 percent forselective retailing; 10 percent for wines and spirits, and 5 percent forperfumes and cosmetics. Like-for-like sales at Sephora advanced 12percent in the U.S. and 8 percent in Europe.
The Bulgari purchasehelped increase LVMH’s gearing as of June 30 to 19 percent, with netdebt of 4.01 billion euros, or $5.8 billion. LVMH has purchased acontrolling stake in Bulgari in a cash-and-share swap and is due tolaunch a tender offer for the remaining shares at 12.25 euros per share,probably in late August, Guiony said.
Bulgari’s former chiefexecutive officer Francesco Trapani assumed his new post as head of thewatch and jewelry division at LVMH on July 1.
Shares in LVMH fell0.42 percent Tuesday to close at 130.00 euros, or $188.33 at currentexchange, on the Paris Bourse before the publication of the first-halfresults.
Separately on Tuesday, Christian Dior SA, parent of LVMHand the Dior fashion house, released sales data broadly in line withLVMH, up 13 percent. Net profit in the first half increased 29.5 percentto 1.44 billion euros, or $2.02 billion, from 1.11 billion euros, or$1.48 billion, during the same period in 2010.
The Dior fashionhouse saw first-half revenues rise 19 percent to 445 million euros, or$624.3 million, reflecting its continued momentum despite the publicitysurrounding the March firing of its star couturier, John Galliano. Salesin Dior’s retail network increased 27 percent in the period at constantexchange rates.
Christian Dior will pay out an interim dividendof 0.98 euros, or $1.42 at current exchange, on Dec. 2, it said.
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