LVMH Sees Big Profits, Dior Gains Despite Galliano’s Demise




LVMH Moët Hennessy Louis Vuitton has recorded significant revenue gains for the first half of 2011.

The world’s largest luxury conglomerate saw revenue of €10.3 billion ($14.9 billion) in the first half of 2011, up 13% from last year. Profits were €2.2 billion, up 22% from 2010.
Bernard Arnault, chairman and CEO of LVMH, credited strong brand appeal, consumer attraction to artisanal products and simple business strategy with prompting the growth.

“The first half was marked by the agreement with the Bulgari family to strengthen the long-term growth of the famous Italian Maison,” Arnault said in a press statement. “We approach the second half of the year … relying upon the creativity and quality of our products as well as the effectiveness of our teams to pursue further market share gains” in both historical and emerging markets.

It has been a busy six months for LVMH, which recently acquired a majority stake in Bulgari, faced opposition in buying part of Hermès, opened dozens of stores worldwide, acquired 70% of Ali Hewson’s Nude Skincare, and fought critics of its planned Frank Gehry art museum in Paris, among other projects.

Perhaps the most notable part of the company’s half-year report was the redoubled strength of Dior despite the scandal surrounding John Galliano’s exit and the poor reviews its fall-winter 2011-2012 haute couture collection received. LVMH reported “robust growth” and a gain in market share for the 65-year-old brand.

Luca Solca, a retail analyst at Sanford C. Bernstein in Zurich, had predicted that Galliano’s departure wouldn’t greatly affect its financial stability.

“Galliano designs the Dior catwalk collection, but the commercial relevance of that collection is very low,” Solca said.

In all, fashion and leather goods registered a 14% jump in organic revenue in the first half of 2011, with Céline in particular generating extraordinary demand.

Performance-wise, though, the shining star in Arnault’s crown is Louis Vuitton. It has seen double-digit organic revenue growth and a high level of profitability so far this year.

Vuitton’s first-ever participation in the Basel watch fair and the opening of a new leather goods workshop in Marsaz, France, likely aided its growth; Arnault has also said Vuitton is aided by the fact that it is the only luxury brand to sell exclusively within its own store network.

All told, the biggest gains for LVMH came in the watches and jewelry group, which saw a 27% jump in revenue over last year. TAG Heuer (with a new automatic chronograph made with the 1887 Calibre movement and the opening of TAG Heuer stores), Hublot (the King Power line with new Unico movements) and Dior (launch of the Dior VIII watch) saw large jumps in sales.

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