FRANCE. Luxury goods group LVMH Moët Hennessy Louis Vuitton has announced consolidated sales of €5,238 million (US$6,021 million) in the first half of 2003; a -9.9% reduction compared with the same period last year.
The group attributed the decline largely to a slump in tourism – triggered by the war in Iraq and the SARS epidemic – and the weakness of the Dollar.
However, provisional operating profit for the half grew by +3%, and organic growth (this is with a comparable structure and constant exchange rates) by +1%. Looking forward, the group said it expected the second half to be “more favourable”.
Worst affected by the drop in tourism was the LVMH Selective Retail arm, which recorded a -13% drop in sales to €1.3 billion (US$1.5 billion).
“DFS was significantly impacted by the fall in Asian tourism due to SARS but continues to reduce internal costs as well as expenses associated with airport concessions,” commented the group via a statement. DFS sales were down over -20% compared to the first half 2002, according to our estimates. LVMH said that total Group organic growth not including DFS was +3%.
But there was better news at Sephora. “Sephora US, whose sales in dollars have increased by +17% since the beginning of the year, will be profitable in 2003,” said LVMH. “Sales at Sephora Europe also continue to grow.”
The group was quick to highlight the positive performances generated by some of its key brands. These included double-digit organic growth from Louis Vuitton; +4% organic growth from Parfums Christian Dior; and a +5% sales volume increase from Hennessy.
By business group, Champagne & Wines achieved +2% organic growth over the first half, boosted by a strong Champagne performance in the UK and Japan, and a +5% volume increase in Cognac sales. However revenue for the division slipped -13% in the half to €797 million.
Louis Vuitton delivered an exceptional performance, most notably in Japan and the US, where the brand achieved double-digit sales growth in the second quarter on a constant exchange rate basis. Nonetheless, revenue from the fashion and leathergoods division dropped by -5.9% to €1.90 billion. Stripped of currency variations, that represented +5% growth, according to LVMH.
Within beauty, Parfums Christian Dior proved the driver, boosted by a new skincare range and the successful Dior Addict franchise. That wasn’t enough to prevent the perfume and cosmetics division’s sales falling by -8% to €974 million (US$1,120 million) but the group is looking to the forthcoming launches of Very Irresistible by Givenchy and L’Instant by Guerlain to improve the second-half performance.
LVMH concluded: “The environment in the second half is expected to be more favourable. There has been a very slight strengthening of the dollar over the last month, and tourism has also seen a slow but steady improvement since the end of May. The Group anticipates that there could be a return to a more normal environment in the first half of 2004, barring any geopolitical or other incident between now and then.
“Some clear signs of a recovery have appeared in most of the Group’s activities since June. LVMH remains focused on developing the market share of its star brands, launching new products, delivering high quality products and capitalising on the dynamism of its teams to achieve its objective, which is maintained in the light of the observed signs of recovery, of tangible operating income growth for 2003.”
