QUARTERLY BOUNCE FOR LVMH

Byline: Miles Socha / With contributions from Jennifer Weil

PARIS — In the uncustomary position of mounting a comeback after its profits nearly evaporated in 2001, LVMH Moet Hennessy Louis Vuitton said Tuesday that first-quarter sales grew 8 percent, to $2.6 billion, and that it expects a “significant rebound” in operating income in 2002.
Separately, Christian Dior SA, parent of LVMH and Christian Dior Couture, announced that its sales in the period advanced 9 percent to $2.7 billion, headlined by a whopping 55 percent spike in sales at its network of 122 Christian Dior boutiques.
At LVMH, a 22 percent sales leap in its core fashion and leather goods division, with sales totaling $967.4 million in the quarter, reflects the recent acquisitions of Donna Karan and Fendi. Strong demand for Louis Vuitton in Japan and the U.S. and better production capacity versus a year ago also contributed to the pickup, a spokesman said. (Dollar figures are converted from the euro at current exchange rates.)
Overall, the French luxury giant said its positive results “reflect the excellent performances of the group brands in an environment made difficult by the continued sluggishness in travel retail.” The rate of organic growth, or sales from continuing operations, totaled 2 percent, the spokesman noted.
LVMH’s selective retail division saw sales drop 5 percent in the quarter to $695.1 million. But in a statement, LVMH noted that sales at DFS, hard hit by the falloff in tourist dollars, were better than expected. The division also includes the beauty chain Sephora and the department stores Le Bon Marche and Samaritaine.
The wines and spirits division, long struggling to recover from the so-called millennium hangover caused by a drop in demand for champagne since the arrival of Y2K, saw sales bubble up 19 percent to $406.7 million.
Separately on Wednesday, LVMH confirmed the sale of the Pommery brand to the Vranken Monopole group for an undisclosed sum. It is believed that LVMH netted between $150 million and $180 million on the transaction, which is comprised of the brand, its site in Reims, cellars, stocks and supply contracts.
As reported, LVMH chief executive officer Bernard Arnault said on April 2 that the luxury firm was “studying a potential sale” of the unit and certain of its assets. As expected, the sale does not include nearly 1,000 acres of prime vineyards, the harvest of which will be applied to the group’s star brands, which include Moet & Chandon, Dom Perignon and Veuve Clicquot.
Sales of perfumes and cosmetics slipped marginally to $440.6 million in the period, but the group expects positive results for the year. Patrick Choel, president of the division, said the relatively flat sales are compared with “an extremely strong” first quarter in 2001, when numerous launches helped volume spike 20 percent. Choel said the perfume and cosmetics division should end 2002 with significant growth.
In the watches and jewelry division, sales dipped slightly to $108.6 million.
French companies report sales and earnings separately. LVMH is expected to announce its first-half results in September.
Analysts said the results were in line with their expectations, but some were stunned to learn in a conference call that DFS was profitable in the quarter, despite an estimated 20 percent fall in revenues. They were also told that sales of Louis Vuitton, the cash cow of the group, inched up 2 percent, while champagne sales leaped 30 percent.
Jacques-Franck Dossin, luxury analyst at Goldman Sachs in London, said he’s confident a recovery is under way, citing month-to-month sales momentum at DFS and early, positive results from its cost-cutting.
“On Sephora, we were also positively impressed by the strong comp-store figures, plus 24 percent in the U.S.,” he said. “This gives more and more credibility to the turnaround story in their retail business.”
“These results were solid. We’re still fans of the stock,” said Andrew Gowen, luxury analyst at Lehman Bros. in London. But he said he does not expect the share price to move substantially in the coming weeks.
Shares in LVMH slipped 1.3 percent Wednesday to close at $50.51 on the Paris Bourse. Last year, LVMH profits plunged 98.6 percent to $8.7 million, but more normal business conditions and internal streamlining have led the company to predict a “soft recovery in the second half” of the current year.

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