By  on March 11, 2002

PARIS -- LVMH Moet Hennessy Louis Vuitton's 2001 earnings may have evaporated, but it's sticking with its game plan in anticipation of a "soft recovery" in the second half of this year.

Although its net group income tumbled dramatically -- 98.6 percent -- to a mere $8.7 million in 2001, the luxury giant is forecasting a "significant rebound" in its fortunes this year as it stresses organic growth and improved profitability.

"We're focused mainly on cash generation, which is very important to our long-term strategy," LVMH chairman Bernard Arnault told an audience of analysts and journalists gathered at the Hotel George V here Friday. "Our results will bounce back considerably....When we have problems, that stimulates us. We take the bull by its horns."

Arnault predicted a "soft recovery in the second half" and downplayed the market perception that LVMH is overly dependent on Japanese consumers. "I don't think Japan is going to cave in," he said.

The slim net income figure was a sliver compared with record earnings of $631.1 million a year ago, a 98.6 percent drop. In line with its guidance, LVMH's operating income fell 20.4 percent last year to $1.36 billion, against $1.71 billion in 2000. As reported, 2001 revenues increased 5.6 percent to $10.69 billion. Dollar figures are converted from the euro at current exchange rates.

Yet LVMH said the limited slowdown in operating income was evidence of its resilience to the economic slowdown and the drop in travel in the wake of Sept. 11.

Taking great pains to reassure investors, who have been impatient with the French group's money-losing retail division, LVMH reported that sales in January and February are ahead 9 percent. And Arnault trotted out all his key deputies to deliver upbeat speeches, emphasizing the familiar LVMH themes of product innovation and "star brands."

Slammed by a drop in tourist travel and a weak yen, LVMH saw operating losses in its selective retailing division balloon to $169.6 million, up from a loss of only $1.8 million a year ago. The retail group comprises DFS, Sephora and the Paris department stores The Bon Marche and Samaritane. Also, losses from "other activities" and write-offs more than doubled to $325.2 million, about half of that stemming from a failed try to make the auction house Phillips a contender against the giants Sotheby's and Christie's.

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