PARIS — LVMH Moët Hennessy Louis Vuitton plans to make selective investments in its business for the remainder of 2009 as part of its cost containment plan, according to chief financial officer Jean-Jacques Guiony.
Spending will be maintained on top-performing brands, while marketing and promotions for other brands will be postponed or suspended, Guiony said Tuesday during a conference call that followed the release of LVMH’s first-half earnings Monday. Guiony did not detail which brands would get the investment.
The company moved up the release of its earnings, which had been scheduled for today, to Monday after the figures were accidentally released to a third party.
LVMH reported a 23 percent decline in first-half profits to 687 million euros, or $934.3 million at average exchange rates for the period, and flat sales as retailers drastically cut their inventories, hurting the company’s wines, spirits, watches and jewelry units.
But despite the continuing economic downturn, the luxury goods maker still expects to gain market share in 2009 on the back of product launches, expansion in new markets and cost containment.
While the results confirmed the difficult trading conditions for these businesses, they also highlighted the resilience of the Louis Vuitton brand, which contributes about 50 percent of group profits.
The monogrammed bags and luggage enjoyed double-digit revenue growth, as consumers focused on buying so-called investment pieces over more fashionable brands — a trend highlighted by rival Hermès last week, as it reported a 12 percent hike in second-quarter sales, aided by its iconic Birkin and Kelly bags.
Bernstein analyst Luca Solca said the results confirmed his expectations about which LVMH businesses are struggling and those that continue to remain resilient amid a difficult consumer environment.
“We view the results as further evidence of the investment merits of LVMH, particularly the relative stability its ‘two-legged’ structure confers,” he said.
Given LVMH’s status as industry bellwether, investors’ attention Tuesday shifted to French luxury and retail group PPR, which is due to publish first-half results Friday.
The company’s Gucci Group, which owns brands Yves Saint Laurent, Gucci, Balenciaga and Stella McCartney, contributes 40 percent of the group’s profits and could benefit as consumers turn to high-end, established brands as they limit their discretionary spending amid the current recession.
PPR shares closed up 1 percent Tuesday at 66.41 euros, or $94.54.
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