LVMH posts 5% gain; sales fell for watches and jewelry

LVMH (Moët Hennessy Louis Vuitton), one of the world’s leading luxury products groups, says that its sales for the year 2001 grew 5 %, for a record 12.2 billion Euros ($10.8 billion). The announcement was made Jan. 23.

Its Watches and Jewelry business group, however, showed the largest drop in business of any LVMH’s division, down 12% for the year, and 20% for the fourth quarter.

Watches and jewelry posted annual sales of 539 million Euros ($476.8 million), of which 150 million Euros ($132.7 million) were in the fourth quarter, ending Dec. 31. The decrease in their performance in 2001, says the LVMH report, was “principally due to the strategic decision to terminate production and sales on behalf of third party brands outside the Group.”

Sales of LVMH’s own brands (excluding the third party brands) reached 517 million Euros ($457.2 million), which LVMH says was “in line” with the year 2000. However, LVMH’s brands “made progress in all regions compared to 2000 except the United States.”

LVMH’s report says that reorganization of its watch and jewelry group and its international distribution network in 2001, as well as “the optimization of the strategies of each brand” should provide what it calls “a solid base for future growth.”

Group results. In speaking of the group results as a whole, the LVMH report said that the 5% gain “following the 35% increase in 2000, was even more remarkable for being achieved in a challenging economic and political environment.” The results for its other divisions include wine & spirits (-4%), fashion & leather (+13%), perfumes and cosmetics (+8%) and selective distribution (+5%).

Sales in the fourth quarter declined by 4%. Following the dramatic decline in travel-related sales due to the September 11 tragedies and the growing weakness of the Japanese yen. There was however, “progressive improvement” during the fourth quarter, says LVMH. October sales fell by 6% versus the previous year, November fell by 5%, and December 2001 matched the record levels of last year. While tourist-driven markets were weak, sales to local consumers in the US, Western Europe, and Japan continued to grow.

“Reinforced position.” Commenting on the group’s results, Toni Belloni, LVMH managing director, said that in 2001, “LVMH reinforced its market position within a deteriorating economic environment, despite the slowdown in travel which affected all luxury goods markets. The logic of our strategy was seen in our fourth quarter performance; once again our portfolio of star brands showed itself to be a unique and valuable asset, strengthening us in times of crisis and achieving gains in market share. Best examples are Louis Vuitton, Hennessy, Parfums Christian Dior, driven by innovation as well as an uncompromising commitment to high quality products and services, which our customers value so highly.”

The year 2001 also demonstrated “the value of our entrepreneurial teams and philosophy,” says Belloni. “We have adjusted quickly to a changing environment to maintain the competitiveness of our brands. The depth of our management talent and our enriched stable of great brands make us confident that we are well positioned to strengthen our leadership in the global market for luxury goods.”

Operating income. LVMH’s income from operations for 2001 is estimated to be 1.560 billion Euros (about $1.4 billion), down from $1.9 billion ($1.7 billion) in 2000. This is due mainly to “the impact of the tragic events of Sept. 11 on the luxury goods markets with the brutal and immediate slowdown of travel that ensued,” says the LVMH report, as well as the weakening of the yen and the effects of the Argentinean financial crisis.

LVMH expects the market environment to “remain difficult in the first half of 2002,” though it also expects its operating income to “rebound materially” this year.

“As in previous crises,” says a company statement, “LVMH will continue to pursue its long-term strategy [of] focusing on the development of its `Star’ brands and on productivity. Sales and our market share are expected to grow, reflecting organic progress and the integration of new power brands such as Donna Karan and Fendi [which it acquired in late 2001].”