PARIS — Organic sales at LVMH Moët Hennessy Louis Vuitton accelerated 8 percent in the fourth quarter to $4.82 billion, fueled by strong growth at the core Louis Vuitton division.
This story first appeared in the January 23, 2004 issue of WWD. Subscribe Today.
This compares with sales of $4.89 billion in the fourth quarter a year ago. In local currency terms, reflecting the adverse impact of currency fluctuations, sales in the quarter fell 1.6 percent to 3.79 billion euros from 3.85 billion euros.
The sales results were in line or above analysts’ expectations; however, the luxury firm disappointed some analysts by projecting operating income growth of around 7 percent. The guidance caused Merrill Lynch in Paris to lower its rating on the stock to “neutral” from “buy.”
Shares in LVMH fell 1.2 percent Thursday to close at $78.74, or 62 euros, on the Paris Bourse.
In a conference call, many analysts remarked on the usually bullish luxury giant’s cautious tone.
“Last year in January, who could have imaged SARS? So we have to be careful in our forecast,” said Patrick Houel, chief financial officer. “In the year 2004, in terms of growth, we will see the same trend we saw in the second half of the year.”
When pressed for precision, Houel said sales accelerated in the last quarter, with December sales for the group advancing 10 percent on a constant-currency basis.
In the U.S., sales of Louis Vuitton products surged 38 percent for the year. Houel mused that Vuitton’s fall ad campaign, featuring Jennifer Lopez, was a factor: “a plus for U.S. citizens.” He noted that 80 percent of Louis Vuitton purchases in the U.S. are by American citizens, whereas “10 years ago, they were mainly Japanese.” The brand was also strong in Japan, with registers ringing up more than $127 million, or 100 million euros, a week for several weeks in December.
LVMH, which reports profits separately, noted that the group aims to achieve a “tangible increase in operating income” for 2004 — the same wording the group used for 2003.
“In an economic and monetary environment [that] should remain challenging, LVMH maintains its long-term strategy,” the firm said in a statement. “The group will continue to focus on its star brands and improving profitability.”
For the full year, sales fell 6 percent to $15.19 billion, or 11.96 billion euros, versus $16.12 billion, or 12.69 billion euros, in 2002. In organic terms, taking out the effects of currency fluctuations, sales grew 4 percent.
The fashion and leather goods division saw double-digit organic growth in the fourth quarter, with Vuitton leading the charge. Houel noted production capacity for multicolor monogram bags — by Vuitton creative director Marc Jacobs and Japanese artist Takashi Murakami — could not meet demand. The company also noted the “emergence of several brands [that] developed strongly, including Marc Jacobs and Pucci, both of which have great potential.”
For the year, sales in fashion and leather goods slipped 1 percent to $5.27 billion, or 4.15 billion euros.
In the selective retail division, sales fell 9 percent to $3.86 billion, or 3.04 billion euros, representing a 1 percent organic increase. Hit hard by a drop in global tourism, DFS “returned to growth” in the fourth quarter, LVMH said, adding that both DFS and Sephora U.S. would be profitable for the year.
Sales of perfume and cosmetics fell 7 percent to $2.77 billion, or 2.18 billion euros, with fourth-quarter organic growth standing at 9 percent. LVMH said new launches L’Instant by Guerlain, Very Irresistible by Givenchy and Kenzo Air had a “very positive effect” on sales.
The watch and jewelry division was a hot topic, given the December disposal of the money-losing Ebel brand, which LVMH said would result in a capital loss of about $127 million, or 100 million euros, last year. For the year, sales in the division fell 9 percent to $637.5 million, or 502 million euros. “This year, we believe this group of businesses will be around breakeven,” said Houel.
Sales in the wines and spirits division fell 7 percent for the year to $2.68 billion, or 2.11 billion euros.