PARIS — Sales momentum at LVMH Moët Hennessy Louis Vuitton slowed to 2 percent in the first half, but the luxury giant still expects operating profits to advance 15 percent for the period.

Trumpeting the resilience of its major brands in a difficult economic environment and highlighting its now-effervescent wines and spirits division, LVMH said sales reached $5.89 billion in the half ended June 30, up from $5.75 billion a year ago. That represents a 4 percent increase based on constant exchange rates. In the second quarter, group sales fell 2.5 percent to $2.9 billion, down from $2.97 billion a year ago. Dollar figures are converted from euros at current exchange rates.

"All of our major brands achieved sales growth at constant exchange rates in the first half, despite the ongoing weakness of tourism," the company said. "The exceptional performance of Louis Vuitton was particularly noteworthy, with good sales growth in Japan and the U.S. in the second quarter."

The results were slightly below analysts’ expectations, but the market reacted positively to the news. Shares of LVMH went up 5.2 percent to close at $43.89 on the Paris Bourse.

"Overall, it was a reasonably good performance, and the market is taking it quite well," said Jacques-Franck Dossin, luxury analyst at Goldman Sachs in London. He said Louis Vuitton performed in line with his forecasts in the second quarter, given the lingering drop in tourism and the negative impact of the World Cup soccer tournament, which deflected consumer attention from luxury goods. He also noted that the recovery at LVMH’s "selective retail" division, which comprises DFS and Sephora, seems to be on track.

However, Claire Kent, chief luxury goods analyst at Morgan Stanley in London, said she found the first-half sales and earnings guidance to be slightly worse than her expectations. While Louis Vuitton "is not doing badly relative to other luxury companies," management has clearly modified its earlier expectation for high-single-digit sales growth for Vuitton for the full year, she said.

Separately on Wednesday, Christian Dior SA, the parent company of LVMH and Christian Dior Couture, said first-half sales rose 3 percent to $6.1 billion, goosed partly by the stellar momentum of the Christian Dior brand. (See related story, this page.)LVMH’s fashion and leather goods division, its largest business group, saw sales leap 16 percent in the first half, to $2.04 billion. Marc Jacobs, Céline and the footwear firm Berluti were cited for special merit. Other brands in the fashion stable include Givenchy, Loewe, Thomas Pink, Pucci, Kenzo and Christian Lacroix.

But in a conference call with analysts, the company said organic growth in fashion and leather goods was flat in the half. The increase reflects the addition of revenues from recently acquired Fendi and Donna Karan.

LVMH officials declined to specify sales growth for the Louis Vuitton brand. When pressed, however, they said Vuitton sales were up 10 percent in the half, excluding sales to Japanese. Some analysts suggested Louis Vuitton sales were likely flat to slightly down in the second quarter.

Meanwhile, the company stressed that the second half of 2002 will benefit from seven new Louis Vuitton locations, including boutiques in Tokyo, Moscow and Chicago, and from new products such as the "Tambour" wristwatch, mini-monogram accessories and a range of apparel and bags in honor of the Louis Vuitton Cup sailing race in New Zealand this fall.

Sales of perfumes and cosmetics inched up 2 percent to $1.07 billion in the half, besting analysts’ expectations. Watches and jewelry sales dipped 3 percent to $257.9 million.

Selective retail remains a trouble spot. Sales in the division slipped 9 percent to $1.58 billion in the half. Sales at DFS, hard-hit in Hawaii, North America and mid-Pacific destinations, fell 21 percent versus a year ago. On the plus side, it noted that Sephora logged same-store sales growth of 25 percent in the U.S.

LVMH reiterated that it expects DFS, trimmed of $150 million in operating costs, to break even this year, while Sephora is expected to turn a profit in 2003.

The long-suffering wines and spirits division continues to recover well from the millennium hangover that saw excess champagne inventories. Sales in the division rose 7 percent to $926.4 million in the half, with champagne sales up 18 percent.

Overall, LVMH said local demand for its products offset the decline in tourist dollars. In the mainland U.S., sales in the half rose 18 percent in U.S. dollars, whereas in Japan, sales grew 11 percent in yen across all categories except cognac. Hawaii, Guam, Taipei and the West Coast of the U.S. remain tough.LVMH said it expects the second half of the year to be more favorable given "an easier base for comparative performance." In the first half of 2001, LVMH sales gained 13 percent. However, it cautioned that the recovery in tourist spending is likely to be slow.

French companies report sales and earnings separately. LVMH is slated to report earnings in mid-September.

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