PARIS — The economy hasn’t dulled the luster of LVMH Moët Hennessy Louis Vuitton.
This story first appeared in the July 30, 2008 issue of WWD. Subscribe Today.
The French luxury conglomerate on Tuesday reported better-than-expected first-half profit growth of 7 percent as its star Louis Vuitton brand delivered strong double-digit increases in most geographic zones, excluding Japan.
Group share of net profit in the six months reached 891 million euros, or $1.36 billion, from 834 million euros, or $1.11 billion, last year on revenue growth of 5 percent to 7.79 billion euros, or $11.92 billion, from 7.41 billion euros, or $9.85 billion, in the comparable period.
Adverse currency conditions, which LVMH said reached “record” proportions, weighed heavily on the numbers, shaving 7 percent off of revenues and eating 12 percent into profit.
LVMH chief Bernard Arnault told a meeting of analysts and press that he remained confident for the rest of the year and that sales in July proceeded at the same pace as in the first half. He said Vuitton continued to deliver double-digit sales growth.
“I’m pretty confident for an excellent second half,” he said, confirming LVMH’s objective for a “tangible increase in results for 2008.”
“The economy and monetary situation are uncertain, but it was already tough in the first six months,” said Arnault.
LVMH’s numbers underscored health among Europe’s key players in a tempestuous economy beset by inflation and eroding consumer sentiment.
Burberry, Hermès and Compagnie Financière Richemont all reported strong numbers this month, driven by demand from emerging markets where newly rich clients continue to spend.
LVMH’s sales in Asia jumped 25 percent in local currencies and 13 percent in euros, led by China. “The region is in great shape,” said Jean-Jacques Guinony, LVMH’s chief financial officer.
Overall LVMH sales in the U.S. grew 9 percent in dollar terms, while Europe advanced 10 percent in local currencies. Sales in Japan retreated 6 percent as business on the island nation continued tough.
LVMH said profits in fashion and leather goods gained 5 percent to 858 million euros, or $1.31 billion, on sales of 2.76 billion euros, or $4.22 billion, up 6 percent, driven by demand for Vuitton bags like the Mahina and Galliera models. This compares with profits of 814 million euros, or $1.08 billion, on sales of 2.6 billion euros, or $3.46 billion, in the previous year. All currency exchanges were made at average rates for the respective periods.
Sales in the division, LVMH’s biggest, would have grown 14 percent without the impact of currency exchange rates.
Yves Carcelle, who heads the division, said demand for Vuitton hasn’t been hurt by the economy.
“We have seen no slowdown in the U.S. or Europe or China,” he said. “Every year we find a new pocket of riches around the world,” he added, explaining that new Vuitton stores in Qatar, Finland and Romania have seen significant success.
Carcelle underscored strong performances from Fendi, Marc by Marc Jacobs and the improvement of profitability at Donna Karan.
Perfumes and cosmetic sales rose 8 percent to 1.26 billion euros, or $1.93 billion, thanks to new fragrances including Dior’s Escale a Portofino. Profits rose 22 percent to 132 million euros, or $201.9 million, from 108 million euros, or $143.6 million.
Beauty chain Sephora logged “remarkable growth,” chief operating officer Antonio Belloni said, pushing ahead sales in the selective retailing division 6 percent to 1.99 billion euros, or $3.04 billion, from 1.88 billion euros, or $2.49 billion. Profits rose 5 percent to 151 million euros, or $231 million, from 144 million euros, or $191.4 million.
Watch and jewelry sales grew 7 percent to 417 million euros, or $638 million, thanks to demand for Tag Heuer watches and Chaumet jewelry. The division’s profit gained 30 percent to 74 million euros, or $113.2 million.
Profits in the wines and spirits division rose 4 percent to 409 million euros, or $625.8 million, from 393 million euros, or $522.3 million. Sales retreated 2 percent to 1.31 billion euros, or $2 billion, hurt by stock issues and adverse currency exchange conditions.
The numbers were released after the market closed. LVMH shares fell 0.4 percent to 68.03 euros, or $107.09 at current exchange, in trading on the Paris Bourse.