PARIS -- Hit by a "brutal" slowdown in travel shopping, a weak yen and a suddenly perilous market for luxury goods that reduced fourth-quarter revenues, LVMH Moet Hennessy Louis Vuitton Wednesday issued its fourth profit warning for 2001 and...
PARIS -- Hit by a "brutal" slowdown in travel shopping, a weak yen and a suddenly perilous market for luxury goods that reduced fourth-quarter revenues, LVMH Moet Hennessy Louis Vuitton Wednesday issued its fourth profit warning for 2001 and reported that sales for the year grew 5 percent to $10.9 billion.
On the plus side, the luxury giant said it expects operating income to "rebound materially" this year thanks to a broad cost-cutting program and the prospect of growth from the likes of its now wholly-owned Fendi and of Donna Karan, the acquisition of which it completed this month.
For 2001, LVMH said it expects income from operations to total $1.4 billion, 20 percent less than in 2000. The downward revision follows three earlier profit warnings as the economic aftershocks of the Sept. 11 terrorist attacks on America rippled through the luxury sector. Most recently, LVMH said it was expecting a 10 to 15 percent earnings drop. Adding to its woes is the economic crisis in Argentina, which "further accentuated this trend."
Fourth-quarter sales dropped 4 percent to $3.12 billion. Dollar figures are converted from the euro at current exchange.
DFS, part of the group's selective retail division, saw sales plummet 33 percent in the fourth quarter and fall 10 percent for the year to $3.1 billion. Given "no certainty on travel recovery or of the direction of the yen," LVMH said it would "right-size" DFS to adapt to a new environment.
LVMH said it does not expect any improvement in the business climate until the second half, but noted some positive signs during the last quarter. Group sales last year dropped 6 percent in October and 5 percent in November, but were flat in December, boosted by sales to local customers in Western Europe and Japan.
Analysts said the revenue figures were in line with their expectations, which suggests LVMH cut its cost structure in 2001 to improve its fortunes in a difficult climate in 2002.
Lauding its leaner organization and the promise of better operating income, investors sent LVMH's shares up 2.6 percent to close at $40.05 on the Paris Bourse.
At Louis Vuitton, still the main engine of the group, sales leaped 10 percent in December and 9 percent for the year. The company attributes this "infatuation" with Vuitton to new products introduced by creative director Marc Jacobs and consumer appreciation for high-quality products.
A Stella McCartney sketch of a custom dress made from protein-based silk in partnership with biotech lab Bolt Threads. The dress will be displayed at The Museum of Modern Art's upcoming design exhibition, "Items: Is Fashion Modern?"