PARIS — Bernard Arnault likes to talk about billion-dollar brands, but on Wednesday, he had new bragging rights: billion-dollar profits — and then some.
Demonstrating accelerating profitability in 2004 despite a dismal currency situation, LVMH Moët Hennessy Louis Vuitton said net profits rocketed 40 percent to 1.01 billion euros, or $1.26 billion at average exchange rates, reaching the 10-figure threshold for the first time in the luxury giant’s history.
“The year 2004 was an excellent one for the group,” an upbeat Arnault told an audience of analysts and journalists Wednesday night at LVMH headquarters here. “This was obtained in spite of very unfavorable currency impact.”
Indeed, the weak dollar shaved 276 million euros, or $343.3 million, from the bottom line, which LVMH said it was able to offset thanks to improvements in its pricing, product mix and tight cost controls.
Operating profits rose 11 percent to 2.42 billion euros, or $3.01 billion, slightly besting analysts’ expectations. At constant exchange rates, the increase stood at 24 percent.
The lion’s share of the boost came from LVMH’s selective retail division, where profits more than doubled to 244 million euros, or $303.5 million, thanks to improved Asian tourism and expense reductions. Sephora’s sales and profits were up “sharply” in Europe and the U.S., according to Antonio Belloni, LVMH’s group managing director.
The watches and jewelry division also showed a dramatic uptick, moving from losses of 48 million euros, or $64 million, in 2003 to profits of 13 million euros, or $16.2 million, last year.
Thanks go partly to Brad Pitt who, as the star of a recent Tag Heuer campaign, was credited for a sharp increase in sales of its timepieces. “We have a number of other stars supporting our brand,” Arnault quipped, dropping such names as Uma Thurman, star of Louis Vuitton’s ad campaigns, and Tiger Woods, who also endorses Tag.
He said such celebrities practically guarantee success. “Of course, one of our board members hadn’t heard of Brad Pitt,” Arnault acknowledged, prompting a round of laughs and chuckling himself. “I won’t name him, but he’s not the youngest member.”
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