BEHIND LOUIS VUITTON, LVMH SALES UP 12%

Byline: Miles Socha

PARIS — Fashion and beauty continue to be the main engines driving growth at LVMH Moet Hennessy Louis Vuitton, with the big horsepower coming from the Louis Vuitton brand.
Fueled by a 20 percent gain in perfumes and cosmetics — particularly J’Adore by Christian Dior and Flower by Kenzo — and an 18 percent increase in its fashion and leather goods division, the luxury giant said Wednesday that first-quarter sales jumped 12 percent, to $2.45 billion. (Dollar figures are converted from the euro at current exchange.)
Champagne sales, however, lost their fizz, dragging down sales in the wines and spirits division by 10 percent.
Myron Ullman, group managing director, acknowledged that the weaker economic conditions in the U.S. and Japan hurt some areas of the business, but characterized the quarter as “a good start” for the year.
The results “demonstrate the group’s resilience based on a strategy centered on balanced geographical diversification and the quality of our renowned global brands,” he said. “Our priorities this year are driving internal growth and developing our brands in order to increase their market share.
“The second half is likely to be stronger than the first half, but it doesn’t change our overall perception for the year.”
LVMH said it intends to sustain double-digit growth in sales and operating income in 2001. As reported, chairman Bernard Arnault said he expects the first half to be impacted by the fall of the dollar against the yen and the euro, but that things should look up during the balance of the year. The French group has ambitions to double its volume and profitability in five years.
As reported, sales in 2000 leaped 35 percent, to $10.9 billion, while net income was up 4 percent, to $568.7 million. Abiding by standard practice, French firms report earnings twice a year — at the half and the end — and report them separately from sales.
In the first quarter of 2001, sales of fashion and leather goods totaled $796.6 million, led by lusty demand for Louis Vuitton products. But the company can’t keep up with that demand. Sales have been limited by manufacturing constraints, which the group is hoping to remedy by increasing production capacity at existing factories and adding new workshops in France.
Kenzo and Loewe were singled out for making “good progress” in the quarter. Other fashion brands in the LVMH stable include Celine, Givenchy, Christian Lacroix and Pucci. The company noted that it improved control over its Japanese distribution of Fendi, which is now a joint venture with Prada Group, and Kenzo.
Strong volume in J’Adore and Flower headlined perfumes and cosmetics, where sales totaled $452.4 million. LVMH noted that Dior and Givenchy products are performing well in the U.S., along with niche startups such as BeneFit, Hard Candy, Urban Decay, Fresh and Make Up For Ever.
Sales in the selective distribution business group increased 15 percent, to $733.1 million, but the performance of LVMH’s various retail concerns varied. Sephora sales advanced 34 percent in Europe and 60 percent in the U.S. in the quarter. LVMH also cited “solid” sales growth at the Paris department store Le Bon Marche.
Sales at Duty Free Shops, however, were flat. The company acknowledged that the weak yen and an uncertain economic climate in Japan is affecting travel patterns and spending at DFS. It held out hope that the second quarter would benefit from a new duty-free concession in Hawaii, bowing in June, and that passenger spending rates would improve at Miami Cruiseline Services, which LVMH acquired last year.
Sales in the fledgling watch and jewelry division inched up 1 percent, to $108.2 million. LVMH said that the tiny gain reflected the termination of some manufacturing licenses, but noted that Chaumet, Fred & Benedom, which makes Dior watches, saw double-digit growth.
Shares of LVMH gained 1.1 percent on Wednesday, to close at $55.56 on the Paris Bourse.