PARIS — Christian Dior Couture did not escape the global economic downturn, and saw sales growth stall as business conditions toughened in the U.S. and Japan.

This story first appeared in the February 9, 2009 issue of WWD. Subscribe Today.

Fourth-quarter revenues dropped 6.9 percent to 202 million euros, or $266.4 million.

For the full year, revenues at the French fashion and accessories house slipped 2.8 percent to 765 million euros, or $1.13 billion, even though Dior said the business “continued to do well in Europe, the Middle East and China.” Expressed at constant exchange rates, total 2008 revenues were flat.

Profits in 2008 from recurring operations stood at 9 million euros, or $13.2 million. This compares with operating profits of 74 million euros, or $101.4 million, in 2007. Dollar figures are converted at average exchange rates for the corresponding period.

Dior said the 2008 profit figure reflects the slower pace of business and costs for expanding its store network and overhauling the supply chain, “a substantial project that will improve the profitability of Christian Dior Couture.”

The company gave no sales or earnings guidance for 2009, but said its objective would be to “increase the flexibility of its organization and to continue its growth strategy of developing very high-end, iconic products.”

Sidney Toledano, Dior’s president and chief executive officer said widespread and early markdowns in the U.S. hurt its business late last year. By contrast, Dior conducted a brief sale in Paris during the regulated period at a temporary location, which “didn’t impact” full-price sales at its Avenue Montaigne flagship.

Dior also exited the logo and “access product” business as it pursues an upscaling drive. On the plus side, Dior posted “significant growth” in ready-to-wear, watches, fine jewelry and handbags priced over 1,000 euros retail, Toledano said.

The repositioning effort has “worked very well in Europe,” meaning some store locations driven by access products are under scrutiny, Toledano said, disclosing that Dior boutiques in Palm Beach and Puerto Rico recently were shuttered.

“We want to continue to put Dior at the top level in the luxury market,” he said. “We see the benefits on the cosmetics business. We have more and more synergies.”

Toledano said Dior would continue to expand its retail network in 2009, with more locations planned for China and the Middle East, as well as St. Petersburg in Russia. The company added 15 stores in 2008.

Dior has been driving its product mix and retail environments more and more upscale to reflect its stature as a pillar of Paris high fashion, exemplified by John Galliano’s summer couture collection inspired by Dutch Masters and Dior’s New Look legacy.

Details about the Dior business were released in tandem with results for Christian Dior SA, the parent of LVMH Moët Hennessy Louis Vuitton and the Dior fashion house. Revenues at the holding company rose 4 percent to 17.93 billion, or $26.38 billion, while the group share of net profits declined 9.5 percent to 796 million euros, or $1.17 billion. In organic terms, revenues grew 7 percent in 2008.

The sales figures closely echo the LVMH annual results announced last week, which showed resilience amid the downturn, thanks to double-digit organic growth at Louis Vuitton and the strong performance of Sephora and the perfumes and cosmetics division.

Indeed, Dior’s strong fashion image continues to pump up the fortunes of its beauty business, which LVMH said posted a “record year in terms of revenue and profitability” as the luxury giant posted a 4 percent increase in fourth-quarter revenues and 2008 profits of 2.03 billion euros, or $2.98 billion at average exchange rates.

LVMH trumpeted the “excellent progress” of Diorshow Iconic mascara and Dior Addict makeup lines, along with successful fragrance launches Dior Homme Sport and Escale à Portofino. For its 2009 outlook, LVMH said makeup creativity would continue to be inspired by Dior’s couture, with products such as Diorskin Nude.