By  on January 20, 2006

PARIS — The good times rolled for Bernard Arnault in 2005 — and faster still in the crucial fourth quarter.

Sales at LVMH Moët Hennessy Louis Vuitton leaped 13.1 percent in the crucial holiday period ended Dec. 31 to 4.31 billion euros, or $5.13 billion, led by "exceptionally strong" sales of Louis Vuitton leather goods, Tag Heuer watches and fine champagnes.

"We are fairly optimistic for 2006. Our markets are showing no signs of slowing down," finance director Jean-Jacques Guiony said during a conference call on Thursday. "The key pillars of this group have shown tremendous strength and potential."

Revenues for the year rose 11.4 percent to a record 13.91 billion euros, or $17.32 billion. Dollar figures have been converted from euros at average exchange rates for the respective periods.

LVMH, which reports earnings on March 2, confirmed a double-digit growth in operating profits for 2005 and set an objective of a "tangible" increase in operating profits this year.

Some analysts were puzzled by the firm's measured tone, especially given the number of times the "D word" — double-digit — was bandied about to describe LVMH's fortunes last year.

The company cited explosive growth in Asia, where sales of fashion and leather goods for the year jumped 20 percent; watches and jewelry, 29 percent, and wines and spirits, 32 percent. Guiony noted that Chinese consumers now represent the luxury group's third-largest clientele, after Japanese and Americans.

The U.S. was also ebullient, with full-year watch and jewelry sales up 26 percent in dollars and Sephora leading its "selective retailing" business group to an 18 percent gain. Guiony cited double-digit same-store sales at Sephora's 100-plus U.S. locations.

LVMH sales accelerated in Europe as well in the fourth quarter, thanks partly to the opening of the world's largest Vuitton store on the Champs-Elysées in Paris last October and strong gains at Sephora, even in sluggish France and Germany.

Fashion and leather goods posted sales of 1.43 billion euros, or $1.7 billion, in the fourth quarter, an 11 percent organic gain, and LVMH trumpeted the highest Vuitton revenues for any December period. The firm credited a host of leather goods by Vuitton creative director Marc Jacobs and particularly denim handbags, as well as the "immediate" success of its new sunglasses line and advertising campaigns featuring actress Uma Thurman.Most other fashion brands received scant mention, save for the "outstanding development" of Fendi and a 2005 performance that confirmed the "high growth potential" for Marc Jacobs, Pucci, Berluti and Loewe, the company said. Guiony declined to get into specifics on Donna Karan, Kenzo, Celine or Givenchy, but said "most have improved" thanks to "very substantial" restructuring. "The businesses that four or five years ago were showing weakness have been restored," Guiony said. "They are working hard to improve sales and profitability."

Watches and jewelry, one of the group's smallest divisions, posted 19 percent organic growth in the quarter to 170 million euros, or $202.2 million. LVMH cited market share gains in the U.S., Japan and Asia, with product highlights including Zenith's styles with visible working parts and Chaumet's Liens and Class One lines.

For the full year, wines and spirits advanced 17 percent to 2.64 billion euros, or $3.29 billion; fashion and leather goods, 10.2 percent to 4.81 billion euros, or $5.99 billion; perfume and cosmetics, 7.4 percent to 2.28 billion euros, or $2.84 billion; watches and jewelry, 16 percent to 572 million euros, or $712.4 million, and selective retailing, 11.4 percent to 3.65 billion euros, or $4.54 billion.

HSBC analysts Antoine Belge and Erwan Rambourg deemed it "a good set of numbers" and said LVMH's earnings growth should accelerate further this year. Thursday's results, largely in line with analysts' expectations, were disclosed in Paris after the close of trading. Shares in LVMH gained 1.6 percent to close at 76.70 euros, or $92.88 at current exchange, on the Paris Bourse.

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