LVMH rises +4% to $39.4bn in 2013

By Doug Newhouse |


LVMH’s revenues rose +4% to €29.1bn ($39.4bn) last year, with +8% organic revenue. Recurring operational profit (+2%) hit €6,021m ($8,158m) for the first time.

LVMH Moët Hennessy Louis Vuitton reported ‘good momentum’ in the US and Asia and continued progress in Europe, despite a ‘challenging economic environment’. Eight per cent organic growth was recorded in the fourth quarter, ‘in line with the trends seen in the first nine months of the year’.

The world’s largest luxurygoods company pointed to a current operating margin of 21% and a ‘net profit share’ of €3,436m ($4,655m), which it pointedly remarked was in line with its 2012 result, which ultimately included a special dividend.

In yesterday’s results statement, the company referred to several highlights, including ‘a remarkable performance in wines and spirits’ and the launch of ‘very high quality leather products at Louis Vuitton’, delivering profitability at a continuing ‘exceptional level’.

LVMH also increased its investment in fashion brands, while benefiting from noted successful results from Parfums Christian Dior and Bulgari and ‘continued progress at Sephora and DFS’ which it said was underpinned by innovation in products and services. The group also recorded a 20% rise in free cash flow to €3bn ($4bn), while reporting a gearing ratio of less than 20% at the end of December 2013

STRONG OVERALL GROWTH
The Selective Retailing division is now the third largest most profitable division, generating sales up +17% (organic) to €8.9bn ($12bn) in 2013 and profit from recurring operations up +6% to €901m ($1.2bn). Commenting on this result, LVMH said: “DFS recorded further strong sales increases, notably reflecting the first full year’s integration of three new concessions from the end of 2012 at Hong Kong International airport – each having been the focus of significant investment in upgrading works.

 

“The destinations of Hong Kong and Macau maintained strong commercial momentum while the weakness of the Yen reduced the spending power of Japanese travellers, notably in Hawaii.”It added that the Sephora beauty chain ‘continued to achieve an exceptional performance’, gaining market share across all its regions, with good added online sales growth. LVMH said Sephora’s progress was also due to innovation, increased personalization of customer relations, and a strengthening of in store and online service offerings. It added that Sephora’s exclusive offering has been notably enhanced by the new Marc Jacobs cosmetics line. Sephora also opened its first store in Thailand in the last trading year.

Fashion & Leather Goods was the only other business group with a higher sales turnover than the Selective Retailing division and it recorded +5% organic revenue growth to €9.8bn ($13.2bn) last year, although profit from recurring fell -4%. Predictably, Louis Vuitton remained the star performer in both profitability and distribution terms.

LVMH made special reference to Louis Vuitton’s innovations last year, including ‘great success’ with its Capucines bag  [named after the rue des Capucines in Paris, where Louis Vuitton opened his first store in 1854] as well as the W bag. It also pointed to the arrival of Nicolas Ghesquière as the new women’s collection artistic director, following the move by Marc Jacobs to focus on his brand.

 

 

WINES & SPIRITS AHEAD OF P&C
In addition, LVMH said Céline recorded a new record ‘remarkable performance, while other brands continued to strengthen their positions, most notably Kenzo, Berluti and Givenchy.

The Wines & Spirits division easily outperformed the Perfumes & Cosmetics arm of LVMH last year, both in sales and profits. Wines & Spirits achieved a +6% sales growth to €4.1bn ($5.5bn) and recurring profit +9% to €1.3bn ($1.7bn) while Perfumes & Cosmetics sales were up +7% to €3.7bn ($5bn) while recurring profit grew by +2% to €414m ($561m).

LVMH said that Wines & Spirits unit experienced good momentum in Asia and the US and ‘a contrasted market in Europe’, while it continued to reap the rewards of its value creation strategy: a focus on the high-end range, a strict pricing policy and a strong dynamic of innovation. LVMH said that Champagne achieved sustained demand for its prestige vintages, while sparkling and still wines from Estates & Wines recorded solid performances. Hennessy Cognac growth continued to be driven by the American market, while both the Glenmorangie and Ardbeg Scotch malt whiskies recorded rapid increases in volumes.  

LVMH acquired the Loro Piana cashmere and rare textiles company last year.

 

The Perfumes & Cosmetics business group also ‘outperformed the market’ by recording organic revenue growth of 7%. Profit from recurring operations increased by 2%. LVMH noted that Parfums Christian Dior continued its momentum and gained market share. It said that the continued vitality of flagship lines like J’adore, which strengthened its market leadership notably in France, and Dior Homme, the international success of Rouge Dior and the development of the skin care Prestige, were ‘remarkable’.

In addition, the company said that Guerlain continued to grow, supported by its fragrance La Petite Robe Noire and the rapid progress of Orchidée impériale. Benefit recorded a further year of strong growth. Make Up For Ever and Fresh both achieved particularly strong performances in Asia. The inauguration of the Hélios research centre at Saint-Jean-de Braye and the reopening of Guerlain’s iconic boutique at 68, Champs-Elysées, were also said to be ‘some of the major highlights’ of the year.


DIVIDEND WILL BE PROPOSED

Last, but not least, the Watches & Jewelry business group recorded organic revenue growth of 4% in 2013. Profit from recurring operations rose by 12%, with a reportedly ‘excellent performance’ in the directly owned boutiques, where the network continues to expand around the world. The company said that its watch brands continued to invest in innovation and development of industrial capacity, such as the new TAG Heuer movement manufacturing facility. In ‘Jewelry’, LVMH highlighted the success of Bulgari’s Serpenti line and its new high-end Diva collection.

Commenting on the results, Bernard Arnault, Chairman and CEO of LVMH said: “2013 saw another excellent performance from LVMH despite exchange rate volatility and slower growth in the European markets. Profit from recurring operations exceeded €6 billion for the first time.  A significant event during the year was the acquisition of Loro Piana, a company famous for its unrivalled work with cashmere and rare textiles, and with which we share the same values of family and craftsmanship.  

DFS Group runs the Perfumes and Cosmetics, Liquor and Tobacco and General Merchandise retailing at Hong Kong International Airport.

 

“All our brands have proven to be exceptionally dynamic. Looking beyond the appeal of our brands, it is the talent of our teams and their motivation that enables us to so effectively execute our strategy. In 2014, LVMH intends to further strengthen its global leadership position in high quality products by relying on its sound, long-term strategy.”

At the Annual Shareholders’ Meeting on April 10, 2014, LVMH will propose a dividend of €3.10 ($4.20) per share, an increase of 7%. An interim dividend of €1.20 ($1.62) per share was paid on December 3 of last year. The balance of €1.90 ($2.57) per share will be paid on April 17, 2014.

 

[TOP IMAGE & IMMEDIATELY ABOVE: LVMH picked out the strong sales contribution from DFS’ relatively new Hong Kong International Airport concession for special mention in its results summary].

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