LVMH posts 10% gain despite 9% drop for watches, jewelry

LVMH, one of the world’s leading luxury products groups, on Oct. 16 posted 8.6 billion Euros ($7.8 billion), a 10% gain, for the nine months ending Sept. 30. However, sales of its watches and jewelry division dropped 9% in that same period, from 427 million Euros ($386.5 million) to 389 million Euros ($349.5 million).

“The evolution of sales in the watch and jewelry business group, reflects the consequences of terminating certain manufacturing licenses that did not conform with the strategy chosen by LVMH for this sector,” says the corporate statement. “In this context, Ebel, Zenith, Christian Dior watches and Chaumet continued to grow in September and see the benefits of their new strategies and innovative marketing campaigns.”

Sales were also down (2%) in wine and spirits, but sales gains were posted by the other divisions: fashion and leather (16%), perfumes and cosmetics (12%) and selective retailing (+13%).

LVMH’s overall sales for all its divisions in third quarter 2001-“a particularly difficult political and economic environment,” which included the terrorist attacks on America, said the LVMH report-rose just 4% to 2.9 billion Euros (almost $2.7 billion). Last year, the gain was 38%.

“Following a dynamic start to the quarter, the tragic events which struck the U.S. [on Sept. 11] have had an impact on some of our activities,” it noted. Overall sales for September alone fell 8% compared to the previous year. Sales for TAG Heuer and Fred specifically fell in September, “suffering from the repercussions of the international economic climate.”

The affect on sales directly affected by the attacks, said the report, “was only partially compensated for by strong performances at Sephora [stores], Cognac and in the Japanese market,” it said. “Nevertheless, there have been tangible signs of improvement during very recent weeks in those areas most directly affected following the attacks.

“The outlook for the short term remains uncertain,” adds the LVMH report, “with the extent of the economic slowdown and the consequences of events in September still being difficult to anticipate.

“Since 11th September, we, like businesses in general, have seen a significant slowdown in sales in our stores in the US, Europe and Asia, while the Japanese market remains very promising. In fact, there has been a gradual improvement since the end of September. “However, it remains to be seen whether this improvement will continue or if the development of the geopolitical situation will have further negative consequences on the global economy in the short term.

“Given these conditions, it would be premature [now] to give estimates for full year results,” says the LVMH report. However, the corporation is “focusing all of our efforts on reaching at least the same level of operating profitability in 2001 as we did in 2000. The Group will use this period to accelerate initiatives to improve profitability, to increase productivity and develop new synergies. By maintaining levels of marketing expenditure, continuing resolutely with its policy for innovation and developing its production capacity in a controlled way, LVMH will be able to strengthen and gain market share, as it has done in previous crises.”

The company says it still aims to double its sales and operating profit over the next five years.