LVMH +3% to $18.8bn but profits fall

By Doug Newhouse |

The Selective Retailing division of LVMH recorded the fastest organic growth of all LVMH’s divisions in HY1 2014.


Its reported growth of +4% was second only to Fashion & Leather Goods with +7% during the period, while Sephora continued to gain market share. However, the fall in Japanese traveller spending and the weakness of the yen hit DFS’ profitability at the same time that it is in expansion and renovation modes at many of its airport concessions.


As a total entity, LVMH Moët Hennessy Louis Vuitton recorded revenue of $18.8bn (€14bn) in the first half of 2014. Organic revenue grew 5% compared to HY 2013, as the group grew further in the United States and Asia, while Europe was said to be resilient, ‘despite a still challenging economic environment’.


LVMH said that organic growth of 3% in the second quarter showed comparable regional trends to the first quarter, except in Japan, which had experienced particularly strong growth during the first quarter.


Profit from recurring operations for the first half of 2014 was €2.576m ($3.468m) and current operating margin reached 18%. Negative exchange rate effects weighed on the first half, while the group share of net profit amounted to €1.509m ($2.032m).




Commenting on the performance, LVMH Chairman and CEO Bernard Arnault said: “The results of the first half demonstrate LVMH’s excellent resilience, thanks to the strength of its brands and the responsiveness of its organization in a climate of economic and financial uncertainties. The first half of the year also witnessed the smooth integration of Loro Piana (see animation graphic above) into the Group.


“Following the first half’s good resilience, it is with confidence that we approach the second half of the year and rely on the creativity and quality of our products, and the effectiveness of our teams, to pursue further market share gains in our traditional markets, as well as in high potential emerging territories.”


Looking at the results by division, the Wines & Spirits sector suffered from destocking by distributors in China, with Cognac suffering most. This division recorded an organic revenue decrease of 1% in the first half of 2014, with profit from recurring operations coming in at €461m ($621m).


By contrast with Cognac, prestige vintages within the Champagne business experienced a good start to the year. In an environment characterized by persistent uncertainty in Europe, the US market apparently ‘continued to enjoy good dynamics’. The business group remained focused on its value strategy: firm pricing policy and strong innovation accompanied by sustained investments in brand communications and in developing its production capacity.


The Fashion & Leather Goods business group recorded organic revenue growth of 4% in the first half of 2014. Profit from recurring operations was €1.487m ($2.002m) and said to be stable in comparison to the same period of 2013, due to a strongly adverse exchange rate effect. Loro Piana experienced an excellent start to the year.




The Perfumes & Cosmetics business also recorded organic revenue growth of 6% with profit from recurring operations coming in at €204m ($275m). LVMH said: “Propelled by the vitality of its flagship lines and the constant attention to quality of its products and their distribution, LVMH’s brands are demonstrating excellent dynamics and increasing market share.


“Parfums Christian Dior continued to benefit from the growth of its iconic perfumes J’Adore and Dior Homme. The make-up segment also experienced sustained growth. Guerlain continues its progress with the ongoing success of La Petite Robe Noire and the rapid development of Orchidée Impériale and Abeille Royale. Benefit, Make Up For Ever and Fresh confirmed their excellent performance.”


Meanwhile, the growing Watches & Jewelry business division recorded organic revenue progress of 3%, although LVMH acknowledged that uncertainties linked to the economic environment continue to make multi-brand retailers prudent in their purchasing. Nevertheless, the performance in the brands’ own boutiques exhibited significant growth.


Bulgari also benefited from positive momentum in jewelry. TAG Heuer focused on the development of its iconic lines. The decrease in profit from recurring operations, which stood at €107m ($144m), is principally explained by a negative exchange rate effect, while investments in communications continue.


Concluding its half year one report, the luxury goods company said: “Despite an uncertain European economic environment, LVMH will continue to gain market share thanks to the numerous product launches planned before the end of the year and its geographic expansion in promising markets, while continuing to manage costs.


“Our strategy of focusing on quality across all our activities, combined with the dynamism and unparalleled creativity of our teams, will enable us to reinforce, once again in 2014, LVMH’s global leadership position in luxury goods. An interim dividend of 1.25 Euro will be paid on December 4, 2014.”


TOP IMAGE: The DFS T Galleria in downtown Waikiki Honolulu.

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