LVMH achieves record results in 2005 – New objective of growth in 2006

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, recorded a 16% increase in its 2005 profit from recurring operations amounting to 2 743 million Euros on revenue of 14 billion Euros, resulting in an operating margin of 20%.

This performance is a result of the strong momentum in organic growth, contributed to by all business groups and geographic regions. It is 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%.

The Group share of net profit increased by 21% compared to 2004, which was also a year of very strong growth. This increase is largely attributable to the Group’s improved operating profitability and the reduction in financial expenses brought about by decreased levels of debt. Group share of net profit would have risen by 32% without the provision relating to the closure of the Samaritaine store for safety reasons.

Mr. Bernard Arnault, Chairman and CEO of LVMH, commented:
“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.”

Highlights of 2005 include:
• 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 & 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 & Jewelry business group,
• New debt reduction. Increased net cash flow from operations for the fifth consecutive year for a total of 2.3 billion Euros,
• A net debt to equity ratio which fell to around 40% following further debt reduction and a strengthened financial structure.

In million euros (IFRS) 2004 2005 % change
Revenue 12 481 13 910 + 11 %
Profit from recurring operations 2 372 2 743 + 16 %
Group share of net profit 1 194 1 440 + 21 %

Profit from recurring operations, by business group:

In millions of Euros (IFRS) 2004 2005 % Change
Wines & Spirits 813 869 + 7 %
Fashion & Leather Goods 1 309 1 467 + 12 %
Perfumes & Cosmetics 150 173 + 15 %
Watches & Jewelry 7 38 x 5
Selective retailing 238 347 + 46 %
Other activities and eliminations (145) (151) -

Wines & Spirits: continued growth of high-end ranges

The profit from recurring operations of the Wines & Spirits business group rose 7% to 869 million Euros in 2005 despite the negative impact of exchange rates. This outstanding performance can be attributed to an increase in sales volumes, particularly within the 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. The New World wines activity continued to develop rapidly and contributed to the growth of the business group.
Hennessy consolidated its leadership position thanks to strong momentum in its key markets, notably China, the US and Russia. 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

The Fashion & Leather Goods business group saw an increase of 12% in its profit from recurring operations to 1 467 million Euros 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. 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. On this occasion, 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.

Perfumes & Cosmetics: new product successes

The Perfumes & Cosmetics business group 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 female perfume SummerbyKenzo.

Watches & Jewelry: further significant improvement in results

Profit from recurring operations of the Watches & Jewelry business group increased fivefold in 2005, thanks to the success of the iconic lines and strong innovation. 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 jewelry 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.

Favorable 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.

LVMH will pursue its strategy of concentrating on internal growth and the development of its leading brands in 2006. As in 2005, the Group is targeting an improvement in profitability and is focusing on cash flow.

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.

Dividend increase of 21 %

At the Annual General Meeting of Shareholders on May 11, 2006, LVMH will propose a dividend of 1.15 Euro per share, an increase of 21%. An interim dividend of 0.25 Euro per share was paid out on December 2, 2005. The balance of 0.90 Euro will be paid on May 18, 2006.