Sales down, profits up in first half for LVMH

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LVMH Moët Hennessy-Louis Vuitton today announced consolidated sales in the first half of 2003 of Eu5.3bn ($6bn), a 9.9% drop compared to the same period in 2002. But operating income for the period rose 3% compared to last year.

LVMH Moët Hennessy-Louis Vuitton today announced consolidated sales in the first half of 2003 of Eu5.3bn ($6bn), a 9.9% drop compared to the same period in 2002. But operating income for the period rose 3% compared to last year.

DFS Group was hard hit by the fall in Asian travel and tourism due to the SARS virus. LVMH said that DFS ?continues to reduce internal costs as well as expenses associated with airport concessions?.

The Selective Retailing arm, of which DFS is part, recorded a drop in sales of 13% to Eu1.3bn ($1.5bn).

LVMH noted several key factors that dictated performance over the past six months.These included the impact of the weak dollar and the fall in global tourism that reached its lowest level in early May. But it said it still recorded double-digit organic growth in key brands including Louis Vuitton, plus strong growth of 4% for Parfums Christian Dior and a sales volume increase of 5% from Hennessy.

Champagne & Wines achieved organic growth of 2% in the first half. In the UK and Japan in particular, the Group's major champagne brands recorded a strong performance, said LVMH. 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.

Sales in the Watches & Jewelry division were affected by de-stocking at the multi-brand stores but the company said these brands continue their long-term development strategy. Christian Dior and Chaumet recorded good sales growth in the first half.

Sephora US, whose dollar sales have increased by 17% since the beginning of the year, will be profitable in 2003, said LVMH. Sales at Sephora Europe also continue to grow.

The combination of the performances of Louis Vuitton, Wines & Spirits and at Parfums Christian Dior, and the improvement in results at Sephora along with the group's exchange rate hedging policy, allowed LVMH to record a 3% increase in provisional operating income in the first half of 2003. This comes on top of a 19% increase in operating income in the first half of 2002.

LVMH said: ?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."