FRANCE. LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, recorded a +16% increase in its 2005 profit from recurring operations to €2,743 million on revenue of €14 billion.
Profit from Selective Retailing, which includes DFS operations, leapt a huge +46% to €347 million last year. In a statement, LVMH said DFS saw a “strong increase” in its revenues and profitability. The increasing adaptation of its product offer to its different clients, the success of its new Okinawa Galleria and continued rigorous management control had contributed to this performance.
LVMH said its overall performance was a result of the strong momentum in organic growth, contributed to by all business groups and geographic regions. The group added that it was all the more noteworthy in view of the continued high negative impact caused by exchange rates in 2005. At constant exchange rates, the group’s profit from recurring operations would have increased by +22%.
Commenting on the results, Chairman and CEO Bernard Arnault said: “LVMH has once again confirmed the strength of its business model, which is built on creativity and quality. The financial performance of the group in 2005 shows the effectiveness of a development strategy based on an exceptional portfolio of brands and on the complementary nature and successful geographic balance of its activities. It has enabled LVMH to once again strengthen its position as global leader and to export worldwide its French and European manufactured products. With all these elements in place, 2006 will be another year of strong growth.”
According to LVMH, highlights of 2005 included:
• The contribution of all business groups to the increase in profitability;
• Continued strong growth across the group’s star brands;
• New market share gains in all the group’s business activities;
• An outstanding year for wines and spirits, highlighted by the acquisition of the Glenmorangie whisky company;
• An exceptional level of operating margin at Louis Vuitton, which enjoyed excellent performances in the US, Asia and Europe;
• Continued progress in Selective Retailing results and a strong improvement in the results of the watches & jewellery business group;
• New debt reduction. Increased net cash flow from operations for the fifth consecutive year for a total of €2.3 billion;
• A net debt to equity ratio which fell to around 40% following further debt reduction and a strengthened financial structure.
Wines & Spirits: continued growth of high-end ranges
Profit from recurring operations of the Wines & Spirits business group rose +7% to €869 million in 2005 despite the negative impact of exchange rates. LVMH attributed this “outstanding” performance to an increase in sales volumes, particularly of high-end ranges, and a firm pricing policy. Among the Champagne brands, Moët & Chandon consolidated its European leadership and saw strong development in Japan. Veuve Clicquot, Krug and Dom Pérignon recorded strong growth in the US and Japan. New World wines continued to develop rapidly.
Hennessy consolidated its leadership position thanks to strong momentum in its key markets, notably China, the US and Russia. LVMH added: “2005 is particularly memorable as the year that Moët Hennessy took operational control of the Millennium company and for the recuperation of the distribution rights for Glenmorangie, after the acquisition of this whisky company at the beginning of the year.”
Fashion & Leather Goods: record year for Louis Vuitton and emergence of new star brands
Fashion & Leather Goods saw an increase of +12% in its profit from recurring operations to €1,467 million in 2005. Louis Vuitton enjoyed an outstanding year and once again reinforced its leadership position. The brand has continued to achieve double-digit organic revenue growth and an “exceptional” level of profitability, LVMH said. “Once again, the brand demonstrated its immense capacity to innovate and the new collections created by Marc Jacobs, notably Denim, enjoyed enormous success. The end of the year will be remembered for the opening of the new ‘Maison’ on the Champs-Elysées in Paris, which aroused worldwide interest.” Louis Vuitton also launched its first collection of sunglasses. Fendi reaped the benefits of its new strategy and saw an improvement in its profitability in 2005. Similarly, Marc Jacobs and Pucci enjoyed an excellent year, thus confirming, together with Fendi, their potential as star brands, according to the firm.
Perfumes & Cosmetics: new product successes
Perfumes & Cosmetics recorded an increase of +15% in its profit from recurring operations. Parfums Christian Dior continued to gain market share, notably in Asia and Europe. The success of the new perfumes Miss Dior Chérie and Dior Homme and the excellent performance of make-up and skincare have sustained the strong growth of the brand. Guerlain had an outstanding year in 2005, particularly in the skincare and make-up segment, with the worldwide success of the lipstick KissKiss. Parfums Kenzo benefited from the successful launch of the women’s perfume SummerbyKenzo.
Watches & Jewellery: further significant improvement in results
Profit from Watches & Jewellery jumped fivefold in 2005, thanks to the success of the iconic lines and strong innovation, said LVMH. TAG Heuer confirmed its status as a star brand. Its new 2005 products within the Aquaracer, Link and Carrera ranges and the golf watch designed together with Tiger Woods showed exceptional performance. Zenith made a significant breakthrough into the high-end watch-making market with Starissime, the first female Tourbillon, and Dior Watches achieved enormous success with its Christal line. Chaumet showed strong development in Europe and Asia, in both jewellery and watches.
Selective Retailing: strong increase in results
In 2005, DFS saw a strong increase in its revenues and profitability. The increasing adaptation of its product offer to its different clients, the success of its new Okinawa Galleria and continued rigorous management control have contributed to this performance.
Sephora has seen excellent momentum in Europe and the US. Its profitability increased sharply in 2005 and Sephora gained market share in Europe. The year is also noteworthy for its entry into China. In the US, the brand recorded double-digit revenue growth for the fifth consecutive year on a comparable store basis.
Favourable growth prospects in 2006
The growth trend observed at the beginning of 2006 confirms the strong momentum of 2005. The group continues to record double-digit revenue growth. Louis Vuitton saw an excellent beginning to the year and continued to achieve double-digit revenue growth.
“After an excellent 2005, LVMH is well positioned for 2006,” the company said.
LVMH aims to pursue its strategy of concentrating on internal growth and the development of its leading brands in 2006. As in 2005, the group will target an improvement in profitability.
Reaffirming its status as the world’s top luxury goods group, the company said: “LVMH has set itself an objective of a very significant growth in its results in 2006. The geographic balance of its activities, the strength and complementarity of its brands along with the exceptional talent of its teams, will allow the group to gain market share and further strengthen its lead in the global luxury goods market.”
MORE STORIES ON LVMH
DFS helps Selective Retailing to +12% rise as LVMH posts strong nine-month results – 18/10/05
Asia drives DFS success as LVMH breaks the billion Euro mark in first half profits – 07/09/05
