LVMH Sees Surge in Operating Profits as Vuitton Shines

LVMH Moet Hennessy Louis Vuitton SA, Paris, pierced the gloom shrouding the luxury goods sector and met 2002 revenue expectations with a 3.8% rise and forecasted a 25% jump in operating profits for the year.

The world’s largest luxury goods company is rebounding after a 20% slide in 2001 operating profits to $1.67 billion. The engine of its business, the Louis Vuitton brand, which saw a fourth quarter surge in sales to help LVMH hit $13.64 billion in full-year revenues. That was up 3.8% from $13.15 billion a year ago and within the range of analysts’ predictions, but below a consensus forecast of $13.78 billion. Sephora’s sales were also up 9%.

LVMH, the home of brands from Christian Dior to Dom Perignon, said fourth quarter revenue grew 7.6% to $4.12 billion from $3.83 billion, with Vuitton sales up 23% on a constant currency basis. Vuitton traditionally accounts for about two-thirds of LVMH’s operating profit.

Sapped by the recent weakening of the dollar, the luxury goods business is also struggling to cope with the lingering downturn in travel and tourism, a core stream of business, brought on by the Sept. 11 terrorist attacks on the U.S. Senior industry executives have warned that any war in Iraq will also likely have a serious impact on the sector. LVMH Thursday restricted its 2003 outlook to “delivering tangible operating profit growth” in “an economic, political and financial environment which remains difficult.”

Chief finance officer Patrick Houel revealed seven new Vuitton stores opened in 2002 accounted for only a small proportion of the jump in sales at the brand. In 2003, Mr. Houel said, LVMH plans to open 15 new Vuitton stores, including its first in India.

The company also plans to continue cutting debt through 2003. Last year, LVMH closed 22 unprofitable outlets at the New York-based Donna Karan fashion house and canceled a number of distribution licenses. Executives also said 2003 will be a transitional year for Roman furrier Fendi. With a special focus on operations in Italy and Japan, Mr. Houel said LVMH would continue to invest in the brand, renovating 30 stores and opening 15 new ones.

“In 2003 we’ll continue to focus on core business, with new store opening and new product launches and a continued, high level of spending on advertising and promotion,” Mr. Houel said.