Disappointing fashion sales dampens spirits at LVMH

Disappointing fashion sales dampens spirits  at LVMH

Even though the French luxury concern LVMH saw its sales rise by 19% (to 28.103 billion euro) and its net profits by 12% (to 3.424 billion) last year, several analysts were disappointed because of the results in the fashion and leather goods division.

Bulgari saves otherwise poor results

Most of LVMH's impressive revenue growth came courtesy of the acquisition of Bulgari: this lifted the watches and jewellery division to a +46% (to 2.836 billion euro), while the organic growth of the department only rose by 6%.

 

Another meagre performance was that of the fashion and leather goods division (still responsible for the majority of LVMH’s revenue), which grew 14% to 9.926 billion euro – even though only half of that growth was organic. Even worse: that growth dropped to only 5% during the third and fourth quarter.

 

CEO Bernard Arnault made it clear that Louis Vuitton, which generates the bulk of the fashion unit’s sales, will not seek revenue growth “at all costs”. The brand will improve existing stores and open “far fewer” new ones as it seeks to take more control of its future direction.

 

Spirited spirits

The wine and spirits division performed quite well, as wealthy consumers continue to increase their spending on items such as Moët & Chandon champagne and Hennessy cognac. Sales roselast year by 17% to 4.137 billion euro, accounting for a very decent 11 % organic sales growth.

 

Arnault remains optimistic for 2013, despite an uncertain economic climate in Europe. His main concern is a possible international currency war, as several economic powers attempt to keep their exchange rates low in order to boost their exports. If the euro grows even stronger against the dollar or the yen, the result will inevitably be price increases, he warns.

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