PARIS — “We are on the road to significant growth for 2004,” said Bernard Arnault, chairman of LVMH Moët Hennessy Louis Vuitton. “In April, group sales increased at double digits in constant currency exchange rates.”
Arnault delivered the upbeat message Thursday at back-to-back LVMH and Christian Dior shareholders’ meetings here.
The French luxury titan added that sales in the U.S. had been “extraordinary,” with Asia and Japan equally robust, despite weaker growth in Europe and especially France.
“I’ve just returned from the United States and business is astonishing,” said Arnault. “Japan, for the first time in 10 years, is coming out of its economic crisis. And watches and jewelry have been very strong. [The category] has one of the highest growth rates in the group for the first part of the year.”
He predicted that a likely hike in U.S. interest rates, which, some analysts fear, could cool resurgent spending in luxury, “would not significantly” alter the pace of business. Arnault said a one or two point rise in interest rates would have a marginal effect on spending and probably inflate the value of the dollar against the euro and thus improve LVMH’s profitability.
As reported, LVMH’s net profits rose 30 percent to 723 million euros last year, or $818.5 million. In the first quarter of 2004, sales rose 2 percent to 2.85 billion euros, or $3.56 billion, LVMH’s best showing in the past five quarters. Dollar figures are converted at the average exchange rate.
“Last year we performed well in difficult circumstances,” said Arnault. “If the environment is better, we should perform better.”
Indeed, luxury has been gaining momentum, with Europe’s major firms reporting strong first-quarter sales as the climate improves for the sector. Arnault said this revival could be sustained, especially as travel flows improve and business booms at the group’s directly owned stores.
He added that LVMH’s star brands, such as Louis Vuitton and Christian Dior, continue to perform beyond expectations.
“There is still room for growth,” said Arnault. “And Vuitton has the biggest potential because demand exceeds our production capabilities.”
He continued, “In the United States, there are waiting lists for the multicolored [Theda] bags. By the end of the year, we’ll have [caught up with demand]. But by that time, we’ll have launched new products and we’ll have another situation of trying to keep up.”
Meanwhile, Arnault said Fendi, the Italian fashion and leather house, now had assembled the right ingredients to elevate it to star status.
“We have exceptional creative leadership from Karl Lagerfeld, the management is great and the growth is among the best in the group. The team at Fendi has experience in this trade and the brand’s success is more or less a given. But it will take three to four years.”
Arnault said LVMH would continue to focus on organic growth. He said the DFS, or Duty Free Shoppers, and Sephora perfumery chain, which analysts consider noncore interests for LVMH, would not be sold until they had been made profitable.
Meanwhile, shareholders approved the naming of three members to LVMH’s board: LVMH financial director Patrick Houel; Hubert Vedrine, the former French foreign minister, and Arnault’s 29-year-old daughter, Delphine.
Shares in LVMH gained 0.79 percent to close at 57.25 euros, or $67.56 at current exchange, in trading on the Paris Bourse.