LVMH increases profits despite poor showing in watches and jewelry

Möet-Hennessy Louis Vuitton (LVMH), the world’s largest luxury goods group, on Wednesday reported a 9% rise in 2003 operating profit and said demand remains strong in the current year.

Paris-based LVMH said continued “organic” (comparable structure and exchange rate) growth of its key brands—including Louis Vuitton and Möet & Chandon—offset a weaker performance by its watches and jewelry division to boost operating income in 2003 to $2.68 billion from $2.4 billion in 2002.

For the year net sales fell by 6% due to the decline in value in the U.S. dollar, the company reported. However, organic net sales grew by 4%. Net income for the company rose by 30%.

Operating income in the Watches & Jewelry division of LVMH fell by approximately $53 million, the company reported. The company, in its report, blamed its “repositioning strategy, restructuring efforts undertaken by the brands,” and “unfavorable currency fluctuations” for the decline.

“These brands should reap the benefits of their innovative efforts and productivity improvements in 2004,” the company said. “By maintaining a development strategy based on a highly complementary portfolio of brands, the results of this business group should improve substantially in 2004.”

Louis Vuitton had performed particularly well, the company said, achieving record margins and a strong performance in the US, where sales of the brand grew by 38%.

LVMH, which saw an acceleration in sales growth in the second half, said the improvement in net income was largely the result of lower financial expenses resulting from debt reduction.

The group said the upward sales trend, first seen last summer, had continued into 2004, with organic sales growth of 7% achieved in the first two months of the year.