LVMH announces strong First Half Operating income growth: +19%
LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, today announced a 19% increase in its first half 2002 operating income, to reach 840 million euros compared to 708 million euros during the first half of 2001. This result is particularly encouraging as it was achieved in a difficult environment, marked by slow economic growth and the persisting weakness of tourism.
Bernard Arnault, Chairman and CEO of LVMH, said: “This progress demonstrates the good health of the Group’s key brands, led by Louis Vuitton, the very strong performance of the Wines & Spirits business group and considerable improvement in results in Selective Distribution. These very encouraging first half results make us confident that 2002 will be an excellent year for LVMH in spite of the uncertain economic environment.”
|In million euros||First half 2001||First half 2002|
|Sales||5 686||5 818|
|Net income before goodwill amortization||318||350|
Key points during the first half of 2002 were:
- Growth from all our key brands
- The success of the Group’s products and fashion collections
- The growth of Louis Vuitton in Japan and the US – which has reinforced its competitive position
- An increase of our market share
- A significant increase in net cash from operations (+27%)
- Substantial cash generation thanks to disposals of non core assets and an improvement in working capital
- A 1.2 billion Euro reduction of net debt in one year
Evolution of operating income by business group:
|In millions of Euros||First half 2001||First half 2002|
|Wines & Spirits||220||277|
|Fashion & Leather Goods||634||655|
|Perfumes & Cosmetics||48||30|
|Watches & Jewelry||15||(7)|
|Other activities and eliminations||(104)||(76)|
Notwithstanding a difficult economic situation, operating income from Cognac and Spirits rose substantially due to strong growth of Hennessy in the United States. Hennessy successfully launched Fine de Cognac in Europe and has continued to develop X.O. in Japan. In order to create a new growth area, the Group has acquired a stake in Millennium, owner of the prestigious Belvedere and Chopin vodka brands.
Fashion & Leather Goods: Louis Vuitton performing well
Operating income growth in the Fashion and Leather Goods business group, in spite of significant investments, confirms the great desirability of the Group’s different brands. Louis Vuitton, in particular, performed remarkably well and maintained its exceptional margins. Sales to domestic customers grew 10% during the first six months of the year. During the second half of the year, Louis Vuitton will accelerate its development by opening new stores and launching new products (such as the Tambour watch for which there is already a worldwide waiting list). The opening of the Louis Vuitton building in Tokyo has been an immense success.
Following the recent take over of their control, continuing efforts are being made at Fendi and Donna Karan in order to step up their international development.
Perfumes & Cosmetics: preparation for new launches during the second half
Sales in the Perfumes and Cosmetics business group increased by 2%. This performance compares with particularly strong growth (+15%) during the first half of 2001 and illustrates the resilience of the Group’s principal brands, most notably Parfums Christian Dior and Kenzo. The successful launches of Eau Torride and Givenchy pour Homme, as well as the performance of the newer American companies, Fresh and BeneFit, also contributed to this progress. First half operating results are not generally significant in this sector as most of the profits are achieved during the second part the year. There will be several new product launches for the Perfumes and Cosmetics business group during the second half of the year, including the new women’s perfume Dior Addict, and the continued roll-out of the Michael Kors, Marc Jacobs and Kenneth Cole perfumes.
Watches & Jewelry: continued strategic refocusing
Sales of LVMH brands grew 2% in a depressed market. Chaumet and Christian Dior in particular have performed extremely well, achieving double-digit growth. Sales in the Watches and Jewelry business group overall declined 3% due to the ending of manufacturing for brands outside the Group. In the first half, operating income for the business group, which has little significance at this stage of its development, was impacted by the significant level of investments needed to implement its strategic repositioning. A number of new watch collections will be launched in the second half of 2002.
Selective Distribution : improved profitability at DFS; continued growth at Sephora
In the context of worldwide weakness in tourism, DFS sales declined 20% during the first half of the year. However, DFS’s cost cutting plan, which was instigated at the end of 2001, has had a positive impact. The objective of DFS, who will continue to pursue its rigorous cost saving efforts in the second half, is to break-even at the end of 2002.
Sephora’s sales, up 6%, demonstrated remarkable progress in the first half, thanks to the growth of its activities in Europe and an exceptional performance in the United States and despite store closures in Germany and Japan. In the United States, the 25% growth on a comparable store basis demonstrates the strength and success of the concept, which continues to gain market share. Overall, Sephora’s results reflect strong improvement and progress torwards its objective of becoming profitable in 2003.
In a generally uncertain economic climate, the end of 2002 for LVMH will be highlighted by:
- Very promising new product launches
- Strategic store openings
- A continued focus to increase cash flow
- Decreasing financial expenses
- Favourable currency hedging
Taking all of these elements into account, which should boost operating income growth during the second half, LVMH confirms its objective of a significant rebound in its 2002 operating income.
An interim dividend payment of 0.22 Euro will be made on 3rd December 2002.