Travel Retail and Duty Free Business Intelligence    Friday 19 September 2014

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DFS returns 'solid performance' in 2009 as final quarter lifts LVMH

Published: 04/02/10

Source: ©The Moodie Report

By Mary Jane Pittilla, Brands Editor

FRANCE. LVMH Moët Hennessy Louis Vuitton has reported a "significant" improvement in performance across all business groups in the fourth quarter, including DFS Group.

In the Selective Distribution unit, DFS registered a "solid performance" despite the slowdown in global tourism, LVMH said.

The increasing importance of Asian customers was evident in the excellent momentum at the Macao Gallerias, opened in 2008, and at the recently renovated store in Hong Kong.

New openings, such as Abu Dhabi and Mumbai, represent significant growth opportunities, LVMH added.

Strong group growth in Asia

The French luxury goods group, which recorded revenue of €17.1 billion in 2009 (down -1%), said: "In a difficult economic environment, the group continued its strong growth in Asia and showed good resilience in Europe."

The Louis Vuitton brand recorded double-digit revenue growth for the year.

With a significant improvement in performances across all its activities, the group’s organic revenue grew +1% in the fourth quarter. A record level of revenue was achieved in December, the group said.

In Wines & Spirits, the particularly strong level of destocking seen in the first half slowed towards the end of the year, LVMH noted. All other business groups achieved growth in revenue on a comparable structure and at comparable exchange rates during the quarter.

Profit from recurring operations was €3,352 million for the year and resulted in a current operating margin of 20%. Group share of net profit was €1,755 million.

"These results reflect the strong reactivity of LVMH’s teams, the cost control measures taken to adapt to the crisis as well as the success of the group’s star brands," the company said in a press release.

LVMH Chairman and CEO Bernard Arnault commented: “LVMH demonstrated exceptional resilience in 2009. The quality of the products, the powerful appeal of our brands and the reactivity of our organisation are the major advantages that made the difference and enabled the group to win market share.

"Louis Vuitton in particular delivered another year of growth and has fortified its leading position. Sustained by its sound strategy, LVMH is ideally positioned to benefit from the recovery and to continue in 2010 to strengthen its leadership in the global luxury goods sector.”

Highlights of 2009 include:

- Market share gains for star brands in their key markets;
- Continued strong growth in Asia;
-Exceptional momentum at Louis Vuitton with double-digit revenue growth and excellent profitability;
- Good resilience from Parfums Christian Dior and Hennessy, linked notably to the strong performance in growing markets;
- Strong increase in free cash flow due to rigorous inventory management and targeted investments.



Wines & Spirits: continued value strategy

The performance of the Wines & Spirits business group improved significantly in the fourth quarter following a period impacted by the crisis and amplified by destocking by distributors.

Hennessy Cognac, which demonstrated good resilience in 2009, registered growth in the period due to strong renewed momentum in the US and China.

Profit from recurring operations was €760 million in 2009.

The Wines & Spirits group maintained its value strategy and continued its strong culture of innovation while continuing to control costs and being rigorously selective in making investments, LVMH said.

Fashion & Leather Goods: exceptional performance from Louis Vuitton

Fashion & Leather Goods recorded revenue growth of +5% in 2009. Profit from recurring operations was €1,986 million.

Louis Vuitton, with double-digit revenue growth in 2009, continued its exceptional momentum and once again strengthened its leading position at the heart of the luxury goods market.

The year was also notable for its creative innovations, both in terms of new models for historic lines, as well as the launch of a new high-end jewellery collection.

In the fast growing men’s market, the rapid progress of the Damier Graphite line contributed to the brand’s excellent performance.

Among the fourth-quarter highlights were the opening of Louis Vuitton Maisons in Las Vegas and Macao.

Fendi, Donna Karan and Marc Jacobs demonstrated their resilience in a difficult environment, the group continued.

Perfumes & Cosmetics: return to growth

For Perfumes & Cosmetics, the fourth quarter saw a return to growth with organic revenue increasing by +2%, following the impact of destocking by several retailers in the first half.

Profit from recurring operations stood at €291 million, and current operating margin improved to reach 11% in 2009.

Parfums Christian Dior continued to benefit in 2009 from the exceptional popularity of J’Adore, the group noted.
The performances of Miss Dior Chérie and of Eau Sauvage, as well as the ongoing momentum of Diorskin Nude, also strongly contributed to Dior’s market share gains.

Guerlain confirmed its growth in its priority markets, due notably to the popularity of the Rouge G lipstick and the promising start for its new perfume, Idylle.

Parfums Givenchy benefited from the success of its Play and Ange ou Démon Le Secret fragrances.

The Benefit brand made considerable progress due to its international expansion.



Watches & Jewelry: targeted expansion and rigorous cost control

In Watches & Jewelry, an improvement in trends in the fourth quarter limited the fall in revenue for the year to -13%. Profit from recurring operations stood at €63 million.

Despite considerable destocking by retailers and the decline of the American and Japanese markets, the Watches & Jewelry brands consolidated their market share and maintained rigorous cost and inventory control.

TAG Heuer, sustained by the success of its collections, notably Carrera and Monaco, strengthened its position in all of its key markets.

Hublot showed good resilience and production started at its new factory, while Zenith celebrated the 40th anniversary of its El Primero movement.

Montres Dior’s Christal line continued its transition to the high-end of the market. The jewellery brands’ own store networks demonstrated good resilience, benefiting from the success of iconic collections, such as Chaumet’s Attrape-Moi and Liens, Fred’s Force 10, and De Beers’ solitaire diamonds.

Selective Distribution: Solid performance from DFS

The Selective Distribution business group recorded +4% revenue growth in 2009. Profit from recurring operations was €388 million.

DFS registered a solid performance despite the slowdown in global tourism. The increasing importance of Asian customers was evident in the excellent momentum at the Macao Gallerias, opened in 2008, and at the recently renovated store in Hong Kong.

New openings, such as Abu Dhabi and Mumbai, represent significant growth opportunities.

Sustained by the continued growth in its store network, Sephora had a good year with further growth in revenue and profit from recurring operations and maintained its current operating margin. This performance resulted in market share gains in all countries. Online sales continued their fast growth in France, the US and China.



Rigorous management to continue amid economic uncertainty

Taking into account the uncertainty of the strength of the economic recovery, LVMH will continue in 2010 to rigorously manage all of its businesses.

The group plans to continue its "strong dynamic innovation and expansion in the most attractive markets", adding: "Strengthened by the flexibility of its organisation and the good balance of its business lines and geographic exposure, LVMH enters 2010 with confidence and has set itself the objective of increasing, once again, its leadership of the global luxury goods industry."

MORE STORIES ON LVMH

LVMH Selective Distribution division posts +5% growth in first nine months – 20/10/09

LVMH profits fall amid destocking; DFS maintains cost cutting as new openings prosper – 28/07/09

Watches slow down, Champagne loses fizz but Vuitton stars as LVMH shows 'resilience’ – 22/04/09

LVMH denies Moët Hennessy sale reports – 22/04/09