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PARIS — LVMH Moët Hennessy Louis Vuitton said it was feeling the pinch of the global economy — even if its star Louis Vuitton brand continues to show resilience.
This story first appeared in the April 23, 2009 issue of WWD. Subscribe Today.
The French luxury group on Wednesday reported first-quarter revenue gained 0.4 percent to 4.02 billion euros, or $5.26 billion, thanks to strong global demand for Louis Vuitton bags, which helped offset deep declines in the hard-hit watch and jewelry and wines and spirits divisions. Sales in the quarter ended March 31, 2008, totaled 4 billion euros, or $5.99 billion. Currency conversions were made at average exchange rates for the respective periods.
On an organic basis, sales in the three months through March dropped 7 percent as LVMH was hit by particularly tough conditions in the U.S. and Japan. Overall sales in the U.S. fell 15 percent and sales in Japan tumbled 18 percent.
Sales in Europe, which also suffered from economic hardship in the stagnating marketplace, lost 6 percent, despite good leather and fashion sales.
Asian revenues provided a glimmer of hope and grew 6 percent in local currencies on strong demand for fashion and leather goods.
The results, which missed most analysts’ expectations, point to difficult trading ahead for Europe’s main luxury players.
PPR, which owns Gucci Group, on Tuesday reported first-quarter revenues lost 2.6 percent, even as sales at its star Gucci brand gained more than 10 percent.
LVMH’s star Vuitton brand likewise turned in a particularly robust performance, with double-digit revenue growth in the quarter.
Vuitton’s revenues grew in all geographic zones, thanks to sustained demand for the Stephen Sprouse tribute line and robust sales of the Damier Graphite, Boétie and Kalahari lines, LVMH said.
Overall, fashion and leather goods revenue improved 7 percent in the quarter to 1.59 billion euros, or $2.09 billion, from 1.44 billion euros, or $2.16 billion, buoyed by Vuitton’s strength.
On an organic basis, sales in the division advanced 4 percent, driven by 24 percent growth in local currencies in Asia.
Fashion and leather goods sales improved 7 percent in Europe but were negative in local currencies in both the U.S. and Japan.
Apart from Vuitton, LVMH said Marc Jacobs and Givenchy sales had been good, while the group’s other brands were struggling.
Perfume and cosmetics sales dove 8 percent in the quarter to 663 million euros, or $867 million, from 717 million euros, or $1.07 billion.
On an organic basis, sales in the division fell 11 percent as travel sales fell by double digits in Japan, Europe and at travel retail outlets. Perfume and cosmetics sales in the U.S. dropped by single digits.
Despite the division’s difficulties, LVMH said some fragrances performed well, driven by demand in China and Russia. They included Dior’s J’Adore and Miss Dior Chérie L’Eau, which is benefiting from a new ad campaign directed by Sofia Coppola.
Watch and jewelry sales tumbled 41 percent on an organic basis to 154 million euros, or $201.4 million, from 211 million euros, or $316.2 million, as Tag Heuer and De Beers came under pressure from consumers cutting budgets.
Tag felt intense pressure in the weak U.S. market, where retailers have been reducing orders as they concentrate on cutting inventory to battle uncertain times.
The midprice watch category, which is Tag’s main positioning, has wilted as aspirational buyers disappear due to the slowdown.
LVMH said high-end jewelry sales at De Beers had been weak but the bridal segment was less affected, suggesting economic hardship hasn’t deterred people from falling in love.
Selective retailing sales fell 1 percent on an organic basis to 1.09 billion euros, or $1.42 billion, from 1.01 billion euros, or $1.52 billion, due to “significant” declines in world travel flows. Sephora, LVMH’s beauty chain, nonetheless delivered revenue growth in all its markets.
Wines and spirits fell 16 percent to 540 million euros, or $706.1 million, from 640 million euros, or $959.1 million, as demand for Champagne and cognac waned due to consumers trading down to cheaper beverages. Champagne sales in the quarter fell 31 percent in organic terms, with cognac sales losing 4 percent against last year.
In separate news, LVMH on Wednesday vigorously denied a rumor that it was in talks to off-load its wines and spirits division to Diageo. It said no talks had occurred.
LVMH stock lost 3.64 percent to close at 53 euros, or $68.69 at current exchange, in trading on the Paris Bourse as investors questioned how luxury would weather the turndown. LVMH issued its numbers after the market closed.
Meanwhile, Christian Dior Group, the parent of LVMH and Christian Dior Couture, reported relatively flat sales in the quarter of 4.18 billion euros, or $5.47 billion, compared with sales of 4.18 billion euros, or $6.26 billion a year ago.
Christian Dior Couture saw revenues decline 8 percent to 169 million euros, or $221 million, from 184 million euros, or $275.8 million. At constant exchange rates, revenues fell 12 percent, with business in the US and Japan particularly challenging while sales remained strong in China and the Middle East.