WWD.com/fashion-news/fashion-features/lvmh-back-on-the-buying-trail-574872/

PARIS — Luxury titan Bernard Arnault again is entertaining the idea of acquisitions.

After several years of focusing on organic growth, the LVMH Moet Hennessy Louis Vuitton chairman on Thursday said buying brands was on his midterm agenda.

He also predicted some of LVMH’s “important” competitors would fall on tough times in the next few years and that when they did he would be ready to buy — but “at the right price.”

Arnault’s comments came as he delivered an upbeat outlook for “significant” growth in full-year operating profit and sales at back-to-back LVMH and Christian Dior shareholders’ meetings here. He told investors the year had started strong and that sales in April and May had been along the lines of the 11 percent like-for-like gain the group reported in the first quarter.

“It’s a good start and we’re confident,” Arnault said, reiterating a longstanding pledge to double LVMH’s size within the next five years.

The market greeted Arnault’s comments positively, driving LVMH stock up 2 percent to close at 57.05 euros, or $73.59 at current exchange, in trading on the Paris Bourse.

With the major European firms reporting strong first-quarter sales and predicting more momentum over the rest of the year, luxury seems set for continued growth.

At the Christian Dior fashion business, for example, LVMH said sales in April gained 16 percent at constant currency rates, and 11 percent after currency exchange. (Dior sales climbed 7.4 percent to 146 million euros, or $188.3 million, in the first quarter.)

Europe continues to be soft, Arnault said. But sales are robust in America and Asia. “I hope it will continue,” said Arnault. “The only problem is the dollar.”

Indeed, the unfavorable dollar-euro exchange cost LVMH last year. As reported, operating profit rose 11 percent. But the increase was 24 percent at constant exchange rates. LVMH’s sales last year climbed 5.6 percent.

Analysts were skeptical that LVMH would find any “quality” brands to buy soon. “We remain convinced that several disposals should occur over the next 12 to 18 months,” said HSBC luxury analyst Antoine Belge. “Brands whose names are rarely mentioned by management — like Donna Karan, Givenchy, Kenzo, Thomas Pink, Fred, Guerlain…are likely candidates in our view.”

This story first appeared in the May 13, 2005 issue of WWD.  Subscribe Today.

Though Arnault gave new signs of acquisitiveness, he said growing LVMH’s star brands, including Vuitton and Dior, remained the group’s priority over the next couple of years. “They have grown to exceptional levels, and we’ll continue to invest most in them,” he said.

To wit: he said potential for the Vuitton brand, which Arnault said clocked double-digit gains in first-quarter sales, remained “extremely strong.” Arnault said he was just back from a trip to New York, where he had found long waiting lists for certain “important” products, such as Vuitton’s new denim handbags.

“Some people think we’re [creating the waiting lists] on purpose,” he joked. “But we just can’t keep up with demand now. We will resolve [the shortage].”

Arnault was equally sanguine on Fendi, saying the appropriate management-creative combo was now in place and would drive the brand forward. He reported that sales in Fendi boutiques had rocketed 40 percent since the beginning of the year. “We will invest heavily in Fendi,” added Arnault. “Along the same lines as Christian Dior.”

Arnault said Tag Heuer was performing strongly, with profits up 20 percent. “We have made intense effort to elevate Tag,” said Arnault. “Today, in certain countries, I’m even told that Rolex is scared of Tag.”

DFS and Sephora also got specific attention, with Arnault saying he didn’t feel pressed to sell either retail operation. Instead, he touted their potential, even claiming he had refused a $1 billion offer to buy Sephora’s operations in the U.S and that Sephora could ultimately operate as many as 1,000 stores in China.

“Today, we’re approaching $500 million in sales [at Sephora in the U.S.],” said Arnault. “The concept has a reputation for being one of the most promising and dynamic retail formats, especially in the U.S.”

Meanwhile, in related news, Dior president Sidney Toledano was elected a member of the board of Christian Dior, which includes the Dior fashion business as well as being the holding company through which Arnault controls LVMH.