FRANCE. A strong improvement in results from the company’s Selective Retailing division (DFS Group and Sephora) highlighted robust first half results from world luxury goods giant LVMH Moët Hennessy Louis Vuitton, announced this morning.
The company said that the Ed Brennan-led DFS had reaped the benefits of sales and marketing initiatives in its DFS Gallerias and took advantage of an improvement in international travel. “In order to maximise the potential growth inherent in the Chinese market, DFS moved its headquarters to Hong Kong and has started to renovate its Gallerias. Its continued efforts to reduce costs and increase productivity enabled the company to post growth in operating income.”
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EUROS (MILLIONS) | 1ST HALF 2004 | 1ST HALF 2003 |
| Wines & Spirits | 335 | 321 |
| Fashion & Leather Goods | 634 | 634 |
| Perfumes & Cosmetics | 42 | 39 |
| Watches & Jewellery | 2 | (38) |
| Selective Retailing | 76 | (15) |
| Other Activities & Eliminations | (93) | (67) |
| Total | 996 | 874 |
Sephora had a strong increase in its operating margin both in Europe and the US. In France, it continued its innovative strategy and saw an acceleration of its sales resulting in an increase in market share. In the US, Sephora increased its dollar sales by double digits for the fourth consecutive year.
Selective Retailing (LVMH does not break out DFS and Sephora results) operating income reached €76 million, compared with a €15 million loss in the first half last year.
LVMH said it achieved a +14% increase in operating income during the first half, amounting to €996 million. “This performance is all the more noteworthy in view of the particularly negative impact caused by exchange rates and the fact that during the same period last year the Group’s results were already higher than the year before despite external factors (such as Iraq and SARS) and at a time when most competitors were posting a strong decline in their results,” the company said.
At constant exchange rates, the Group’s operating income increased by over +30%.
The Group’s net income increased by +49% compared to the first half of 2003, which was itself up +24% over the previous year’s first half. This significant increase was achieved due to improved operating profitability and further declines in the Group’s financial expenses.
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Ed Brennan’s DFS is reaping the benefits of sales and marketing initiatives in its Gallerias and taking advantage of an improvement in international travel |
Bernard Arnault, Chairman and CEO of LVMH, commented: “Our performance during the first half of the year once again demonstrated the exceptional appeal of our brands as well as the effectiveness of our strategy. Thanks to a successful combination of these factors, we have been able to deliver both an increase in our operating margin, as well as gains in market share.
“Sales during the summer have continued the strong trend we saw at the beginning of the year. A number of product launches in conjunction with the growth of our core brands in high-potential markets should allow LVMH to continue its progress in the second half of the year. All these elements allow us to confirm our objective of a significant increase in operating income in 2004.”
Highlights of the first half of 2004 were:
* Double-digit organic sales growth for LVMH Group
* Market share gains for all our leading brands
* Double-digit organic sales growth at Louis Vuitton while maintaining margins in excess of 45%
* Reduction in administrative costs thereby enabling further significant investment in communications
* Increase in the Group’s operating margin to a level of 18% in the first half of 2004
* Return to a profitable situation at Watches & Jewelry
* Strong improvement in Selective Retailing results
* +11% rise in cash flow from operations to €828 million following two years of strong growth
* Marked negative currency impact at the Wines & Spirits and Fashion & Leather Goods businesses, which was offset by exceptional growth in both divisions
