Good performance for LVMH in First Half 2003 ; Profits progress despite the environment

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, announced consolidated sales in the first half of 2003 of 5,238 million Euros, a 9.9% reduction compared to the same period in 2002, but recording organic growth (that is with a comparable structure and constant exchange rates) of +1%. Provisional operating income for the first half grew by approximately 3% over the same period last year. It is worth noting:

  • The cumulative impact on sales of the weak dollar (exchange rate impact of roughly 11%) and the significant reduction in tourism (following the Iraqi war and the SARS epidemic).
  • Tourism reached its lowest level in the first half during May; which explains the reduced activity in the affected zones in the second quarter.
  • Within this context, our star brands delivered a remarkable performance including notably, double-digit organic growth from Louis Vuitton in the first half, organic growth of 4% for Parfums Christian Dior and a sales volume increase of 5% from Hennessy.
  • A material reduction in DFS sales allied to the slow down in tourism. Not including DFS, organic growth for the Group was 3%.
  • An exceptional performance from Sephora in the US (+17% in dollars).
  • The success of our cosmetic start up brands (e.g. BeneFit +23% at constant exchange rates).
  • Gains in market share across all our brands.

Revenue by business group:

In million euros First half 2003 First half 2002 Change
Reported Organic
Wines & Spirits 797 916 - 13 % + 2 %
Fashion & Leather Goods 1 897   2 023 - 6 % + 5 %
Perfumes & Cosmetics 974 1 059 - 8 % -
Watches & Jewelry 210 255 - 17,6 % - 8 %
Selective Retailing 1 353 1 560 - 13 % - 3 %
Other activities and eliminations 7 5 - -

Champagne & Wines achieved organic growth of 2% over the first half. In the UK and Japan in particular, the Group’s major champagne brands recorded a strong performance. Cognac sales volumes increased 5% in the period, due to sustained growth in the US and despite the impact during May and June of SARS in Asia.   Louis Vuitton delivered an exceptional performance, notably in Japan and the US where the brand continued to record double digit sales growth in second quarter on a constant exchange rate basis. Sales to local customers were particularly strong in these regions. The new products from Marc Jacobs were enthusiastically received while the Suhali leather goods range, made from goatskin, has already attracted a long waiting list.   Parfums Christian Dior sales growth has been driven over the first half by the success of its new skincare range alongside the continuing progress of Dior Addict. In the near future, two new fragrances for women, Very Irresistible by Givenchy and L’Instant by Guerlain, and a new fragrance for men, KenzoAir, will be launched.   Sales of the Group’s Watches & Jewelry brands were affected by destocking at the multi-brand stores but these brands continue their long-term development strategy. Christian Dior and Chaumet recorded good sales growth in the first half.   Sephora US, whose sales in dollars have increased by 17% since the beginning of the year, will be profitable in 2003. Sales at Sephora Europe also continue to grow. DFS was significantly impacted by the fall in Asian tourism due to SARS but continues to reduce internal costs as well as expenses associated with airport concessions.   The combination of the remarkable performance of Louis Vuitton, favorable trends in Wines & Spirits and at Parfums Christian Dior, and the improvement in results at Sephora along with a successful exchange rate hedging policy, allowed the Group to record a 3% increase in provisional operating income in the first half of 2003. This performance, which comes on top of a 19% increase in operating income in the first half of 2002, is particularly encouraging when compared to the weaker results of some competitors. Further it is a clear illustration of the quality of our brands and the increasing appeal that they hold in their markets.   The environment in the second half is expected to be more favourable. In fact there has been a very slight strengthening of the dollar over the last month, and tourism has also seen a slow but steady improvement since the end of May. The Group anticipates that there could be a return to a more normal environment in the first half of 2004, barring any geopolitical or other incident between now and then. Some clear signs of a recovery have appeared in most of the Group’s activities since June.   These external factors are nevertheless uncertain. Accordingly, LVMH remains focused on developing the market share of its star brands, launching new products, delivering high quality products and capitalising on the dynamism of its teams to achieve its objective, which is maintained in the light of the observed signs of recovery, of tangible operating income growth for 2003.