CELINE MOVING INTO LVMH
Byline: Katherine Weisman and Sarah Raper
PARIS — Luxury goods conglomerate LVMH Mot Hennessy Louis Vuitton is stretching further this year with more acquisitions.
Chairman Bernard Arnault announced Thursday that fashion and leather goods concern CAline would be transferred to LVMH “in the next few days” from Au Bon Marche, another one of Arnault’s principal holding companies.
Speaking at the group’s annual meeting for financial analysts, Arnault said the transaction is valued at $534.8 million (2.7 billion francs). Last year, Celine earned net profits of $31.7 million (160 million francs) on consolidated sales of $393.2 million (1.99 billion francs).
The deal, which has been under discussion since 1994, is part of Arnault’s strategy to group fashion and luxury companies under the LVMH holding in order to create and develop synergies between sister companies, Arnault told WWD following the meeting.
Along with CAline, LVMH will be acquiring all of Guerlain.
The members of the Guerlain family who have held on to a stake of 42 percent since selling their controlling share in 1994 have decided to give up their shares. LVMH should gain 100 percent control of the perfumer “in one to two months,” Arnault said. He declined to give additional details of the deal.
These moves follow this year’s purchase of the remaining shares in Spanish leather goods maker Loewe, and last year’s acquisition of Fred Joailler, which Arnault stated was part of his plan to develop a pole of activity around the fine jewelry and watch business.
The group aims to develop Fred’s synergies with Vuitton companies. For example, Fred could manufacture watches for the different brands in the group, Arnault explained.
A number of other points were highlighted during the meeting.
* The group will launch four women’s fragrance this fall, scheduled so that retailers can give attention to each. A Givenchy introduction is set for September, Guerlain for October and Kenzo for November. Celine will be launching its first women’s fragrance in its own stores and selected retailers also in September.
* Louis Vuitton plans to open flagships in New York, London and Paris. In New York, the store will be on the ground floor of LVMH’s new 57th Street headquarters, said Vuitton president Yves Carcelle. In London, it will move to a different address on Bond Street. In Paris, the company just signed a lease for a store on the corner of Avenue George V and the Champs Elysees, opposite the famous Fouquet’s restaurant and cafe.
* Arnault said the outlook for 1996 in Europe was “lackluster” and gloomiest in France and Germany. He noted that economic conditions in the U.S. and Japan were improving.
* Group spending on advertising rose 13 percent last year and Arnault said he expected to maintain that level of investment in 1996.
* Christian Lacroix is still losing money although Arnault declined to specify how much. He had previously said he expected the fashion house to hit the break-even point by the end of 1995. While Lacroix’s losses have narrowed significantly, thanks to the launches of the Bazar and Jeans sportswear lines, Arnault told analysts that breaking even won’t happen without a fragrance.
“Profitability depends greatly on perfume and cosmetics businesses,” Arnault said. “We weren’t lucky. Our perfume [C’est La Vie] didn’t work.”
He said that Lacroix is expected to launch a new women’s fragrance within the next two years.
Meanwhile, Arnault told WWD that the fashion businesses of Kenzo and Givenchy were profitable. Overall, the division that includes these labels, in addition to several financial newspapers, had losses of $40.4 million (204 million francs), about the same as in 1994.
In addition. LVMH owns the fragrance businesses of Givenchy and Kenzo; Parfums Christian Dior; Louis Vuitton Malletier; Hennessy cognac, and several champagne brands, including Mot & Chandon and Ruinart.
At the meeting, the company announced that net profits for last year rose 10.3 percent to $801.6 million (4.05 billion francs). While these results were anticipated, the increase was significantly less than the gain posted in 1994 when net income rose 23.4 percent to 3.67 billion francs, excluding unusual items related to the group’s restructuring of its ties with Guinness that year. Including these items, net income in 1994 was 6.421 billion francs.
Operating profits were up 6 percent last year to $1.43 billion (7.2 billion francs). The company broke operating profits down by sector, with . luggage and leather goods reporting an increase of 12.4 percent to $687.3 million (3.47 billion francs). Operating profits for perfumes and beauty products rose 12.7 percent to $248.4 million (1.25 billion francs); wines and champagnes grew 21.4 percent to $201.2 million (1.016 billion francs), and cognac and spirits dropped 15.3 percent to $330.2 million (1.667 billion francs).
As reported, consolidated sales for the year rose 6.5 percent to $5.9 billion (29.78 billion francs).
Arnault noted that sales in luxury goods rose 16 percent, a better performance than wines and spirits, whose sales fell 5 percent last year.
The sales and profit growth rates were negatively affected by several factors. The exchange rate of the strong franc against weaker currencies like the dollar penalized sales by 5 percentage points and profits by 15 points, Arnault said. At constant exchange rates, sales would have risen 11.7 percent and profits 25 percent.
Arnault also said that changes in French corporate taxes last year cost the company roughly $20 million (100 million francs) on its bottom line. On the other hand, lower interest rates and debt reduction allowed the group to slash its financial charges by 52 percent.
Within the fragrance and cosmetics division, Dior registered 1995 sales of $1.09 billion (5.5 billion francs); Guerlain, $416 million (2.1 billion francs); Givenchy, $257.5 million (1.3 billion francs), and Kenzo, just under $100 million (500 million francs). All were up except Givenchy, which was down slightly.
At Vuitton, 12 stores opened last year, including a location in Buenos Aires. The goal this year is to add 11 shops for a total of 200. This includes shops slated to open in new markets like Turkey and Indonesia, as well as in Spain. Vuitton is also planning to expand its product line this year, having introduced lines like the grained Epi range and the Taiga men’s line in the last few years. Currently, a new collection of exotic skin bags and accessories is being sold in the new Vuitton store on Place St. Germain des PrAs, and plans are to roll out these goods into a very select number of Vuitton stores worldwide, Carcelle said. A new range is expected to be introduced this fall.
Meanwhile, Vuitton’s special edition monogram bags created by a handful of designers including Helmut Lang and Isaac Mizrahi to celebrate the monogram canvas’s 100th anniversary are “selling beyond expectations,” and several models have sold out.