With talent and discipline, our teams have responded to the challenge

At the end of a year marked by an unprecedented global crisis, our Group responded to the challenge set and increased its market share. Making the most of improved conditions in the third quarter, LVMH even managed to register record revenue in the month of December. We owe this performance primarily to the talent of our teams and their perfect execution of Group strategy. The commitment of the men and women in the Group allowed us to combine the disciplined management approach called for by market conditions, with proactivity and efficiency, underpinned by targeted investments and a tradition of high quality creativity.

As in previous difficult periods, our Group demonstrated the soundness of its growth model in 2009 and found the necessary resources to meet new challenges and further its development. The Group’s resilience was largely due to the diversity of our businesses: while our Wines & Spirits and Watches & Jewelry brands were most impacted by the crisis due to destocking at distributors and retail traders, the businesses where we are in direct contact with our customers, through our own store networks, enjoyed better conditions. Our strategy of focusing our efforts on our star brands, key markets and opportunities offering the best return on investment, bore its fruit. Finally, the reactivity of our organisation and the extremely rigorous management of costs and stocks throughout all our businesses, enabled us to preserve an excellent level of profitability at Group level. This has resulted in an operating margin of nearly 20% and significantly improved cash flow.

Undeniable successes for all our businesses

It is worth highlighting that the teams across all our businesses have registered some real successes: Louis Vuitton had an exceptional year, achieving double-digit global growth and progress in all of its product categories. Sephora continued to forge its unique approach in the world of beauty products and to expand in different regions of the world. Thanks to the success of its innovation strategy (Hennessy Black and Hennessy VS 44 in honour of Barack Obama…) and through intense ground work, Hennessy returned to growth in the United States during the year and strengthened its position in a market which had a particularly difficult 2009. Parfums Christian Dior continued to illustrate its roots in the world of couture with power and modernity, drawing on both the extraordinary vitality of its iconic lines (Miss Dior, J’adore, Eau Sauvage…) and the quality of its innovations in skin care and make-up. TAG Heuer confirmed its technological advance and succeeded in marketing, among other products, the Monaco V4, a watch whose concept is revolutionising the watch-making industry. Hublot, which recently joined the Group, won a first prize in Geneva for the third time in five years. Make Up For Ever continued its remarkable growth in the United States, France and China. Marc Jacobs and Benefit, two of our youngest brands, have continued to shine and to grow despite the difficult environment in 2009.

Strategy of value and long term vision

There is one other point which I think is essential to highlight: we have consistently adhered to a strategy of value and long-term vision which is the life blood of LVMH. We took advantage of this turbulent period, during which our customers sought a return to core values, to recall our fundamental strengths, our heritage of excellence, and the values of creativity and durability which are embodied by the Group’s brands - brands whose stature and image never cease to grow. As witnessed by the rebound registered by all our businesses at the end of the year, this strategy has not been compromised within the Group and has put us in an ideal position to prepare for the future.

We will approach 2010 with confidence and determination but will not abandon the prudence demanded by the continuing uncertain environment. If worldwide economies manage to exit from the crisis, it is more than likely that their recovery will be progressive and staggered. It would be dangerous to forecast a date for a solid global recovery. For this reason, we will not relax our management efforts and will continue to focus on only truly profitable, strategic opportunities with an extremely selective allocation of our resources.

Excellent potential

The key drivers of our strategy will continue to be innovation and the expansion of our presence worldwide. Louis Vuitton, in particular, will launch some powerful products which will enrich its major lines such as Monogram and Damier. It will also develop its product offering in leather and open in some new countries. The situation at distributors has now normalised and our Wines & Spirits and Watches & Jewelry activities should benefit from a more favorable environment in 2010. Hennessy Black’s early success in several American markets in 2009 suggests excellent perspectives for its full national launch this year and Chinese economic growth will provide good growth opportunities for cognac during the coming months. TAG Heuer will this year celebrate its 150th anniversary; it will be an opportunity to celebrate its avant-garde heritage with, in particular, a new edition of one of its iconic watches. Parfums Christian Dior will continue to strengthen its star brands in perfume and make-up while proceeding with the launch of a revolutionary skincare product in its Capture Totale range…

Once this cyclical slowdown is behind us, I am convinced that the future holds excellent potential, in historic markets as well as in emerging markets, for brands which know how to continually inspire their contemporaries, regardless of where they are in the world, and are committed to quality, beauty and authenticity. This is our ambition, upheld by the Group’s employees, and each year this enables us to build and strengthen the global leadership of LVMH.

4 February 2010

Bernard Arnault
Chairman & Chief Executive Officer