LVMH MOET HENNESSY LOUIS VUITTON’s first-half sales dropped at all five of its operating divisions as revenues crumpled 9.9 percent to $5.9 billion from $6.56 billion in last year’s comparable period. The decline was even more pronounced in the second quarter, as sales were off 14.9 percent to $2.74 billion due to a decline in tourism and unfavorable currency exchange markets. However, the Paris-based luxury giant said business has improved with the arrival of the second half and noted, to the approval of investors, that first-half operating income had gained about 3 percent. Chief financial officer Patrick Houel said sales had improved in the second half of June and early July after a difficult April and an abysmal May. “We think that the second half will be better,” he added, pointing to a slow revival in travel flows and a slight strengthening of the dollar. LVMH also said it expects a return of a “more normal environment” in the first half of 2004, “barring any geopolitical or other incident between now and then. Some clear signs of recovery have appeared in most of the group’s activities since June. These external factors are nevertheless uncertain.” Although its star Louis Vuitton brand logged double-digit growth, first-half sales in the fashion and leather goods division declined 6 percent to $2.11 billion….Fighting against what GUCCI GROUP president and chief executive Domenico De Sole described as a “perfect storm” in which “everything that could go wrong went wrong,” the luxury house’s first-quarter net income nearly evaporated, receding 96.6 percent to $1.4 million, or 1 cent a share. The firm finished the quarter with an operating loss and reported that consolidated sales declined 6.7 percent to $655.9 million and were especially weak for the core Gucci brand, sliding 13.7 percent. At constant currency rates, however, group sales would have been flat. Despite the disappointing results for the period ended April 30, De Sole, based on “improving revenue trends,” was optimistic for the rest of the year. Gucci’s bottom line was battered by wider losses at Yves Saint Laurent and Gucci’s “other operations” division, a group of acquisitions including Bottega Veneta, Sergio Rossi, Stella McCartney, Alexander McQueen and Balenciaga. Gucci’s principal owner, Pinault-Printemps-Redoute, has continued to acquire shares of Gucci, boosting its stake in the firm to 66.95 percent as of Aug. 20. PPR may acquire up to 70 percent of Gucci by the end of the year and will then acquire the remainder in 2004….Saying that his firm will outperform much of the luxury sector this year, PRADA GROUP ceo Patrizio Bertelli predicted net income for the year would jump at least 30 percent above the $31.1 million in profits generated in 2002, much of it due to aggressive cost-cutting. Sales are expected to be roughly in line with 2002’s $1.81 billion, he said. The firm has been working on reducing its debt, which stood at more than $800 million at the end of last year, and sources report that it’s in talks to restructure its $787 million convertible bond issue, which must be paid back in 2005 if the firm doesn’t go public. In a continuing game of musical chairs in Italy, Prada ended its eyewear venture with De Rigo, buying out De Rigo’s 51 percent stake, and sold the joint-venture firm, International Eyewear Distribution, to Luxottica Group. Luxottica, which had earlier seen its eyewear license with Giorgio Armani terminated, has a 10-year license for both the Prada and Miu Miu brands….HERMES INTERNATIONAL’s second-quarter sales slipped 9.2 percent to $290.4 million as the twin ills of lower tourism and negative currency effects cut into the top line. Excluding currency effects, sales were up 1.1 percent, modestly ahead of analysts’ expectations. Antoine Belge, luxury analyst at HSBC in Paris, estimated April sales fell 4 to 5 percent, stabilized in May and increased in June about 6 percent. In July, sales likely increased in line with the first half, about 3 to 4 percent, he added. Like other analysts, Belge said he was surprised by the magnitude of the drop in European sales during the quarter: 11 percent overall, with a 14 percent descent in France. He estimated that sales at Hermès’ usually bustling Faubourg Saint-Honore flagship fell 12 percent, since that unit depends on tourists for roughly a quarter of its clients. Among the more encouraging second-quarter developments were sales increases in Japan, Koera and the Americas of 16, 14, and 6 percent, respectively, and growth of about 5 percent in leather goods, according to estimates. However, sales of ready-to-wear and fashion accessories, now categorized together, fell 18.6 percent….BULGARI ceo Francesco Trapani saw signs of improvement early in the summer, but too late for the firm to avoid a 6.9 percent decline in second-quarter sales, to $193.9 million. The severity of second-quarter’s slump throughout the luxury sector is reflected in the fact that the sales decline for the first half was a less onerous 2.4 percent, to $377.7 million. “June was the first month showing improvement,” Trapani said in a phone interview. “ Top-line numbers were hit hard by currency fluctuation. The company said second-quarter revenue would have risen 1 percent at constant currency rates while turnover for the first half would have risen 4 percent….Strength in its home market of Italy and with its emerging Fay apparel brand allowed GRUPPO TOD’S SPA’s first-half sales to rise 3.8 percent to $198.4 million, and the increase would have been 8.6 percent if not for currency fluctuation. The Fay brand saw a 51.3 percent jump in first-half revenue to $27.5 million. Leather goods and apparel both showed growth in the half, jumping 16.1 percent and 44.9 percent, respectively….Losses from the recently acquired Valentino, coupled with an exceptionally high tax rate, pushed MARZOTTO to a net loss of $10.2 million in the first half of 2003. The company warned that, with the higher tax burden and without the capital gains which inflated 2002 results, net income for the full year is likely to drop sharply. Sales in the clothing sector rose 5 percent while those in the textile sector grew by 4 percent.

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