News Last year, the world leader in luxury products saw its operating and net profit increase sharply. And the prospects for 2006 are very favourable.
In 2005 the LVMH group recorded growth of 16% in its current-year operating profit, to 2,743 million euros, on sales of 14 billion. This performance, achieved thanks to a strong dynamic of organic growth to which all activities and regions contributed, is even more exceptional in the light of the negative impact of exchange rates, again very considerable over the year (at constant exchange rates, the increase in operating profit would have been 22%).
For its part, net profit (1,440 million euros) rose by 21% compared to the 2004 financial year, which itself registered exceptional growth. This increase can be explained in particular by an improvement in the group’s profitability at an operational level, and by the reduction of financial charges due to recent cuts in gearing. The increase would have been as much as 32% without the provision implemented in connection with the closure, for safety reasons, of the Parisian store La Samaritaine.
In the light of these results, Bernard Arnault, the CEO of LVMH, commented: "Once again, LVMH demonstrates the strength of its development model, which encourages creativity and quality. The group’s financial performance in 2005 illustrates the effectiveness of this model, based on an exceptional portfolio of brands and on the complementary nature and good geographical balance of its activities. It has allowed LVMH to further consolidate its position as world leader and to export, throughout the world, its products manufactured in France and in Europe."
In terms of sectors of activity, watches and jewellery achieved a fivefold increase in operating profit, from 7 to 38 million euros, buoyed by the success of iconic lines and strong innovation. TAG Heuer confirmed its status as a star brand. Its new products for 2005 in the Aquaracer, Link and Carrera ranges, as well as the golf watch designed with Tiger Woods, performed exceptionally well. For its part, Zenith accentuated its breakthrough in the luxury watch segment with the Starissime, the first ladies’ Tourbillon, while Montres Dior launched the enormously successful Christal line. Lastly, Chaumet made strong progress in Europe and in Asia, both in jewellery and watches.
The fashion and leather goods activity meanwhile increased its operating profit by 12% to 1,467 million euros. Louis Vuitton had a remarkable year and further strengthened its leadership. The brand again achieved a two-digit level of organic growth in sales and sustained an exceptional level of profitability. The end of the year was marked by the opening of the group’s store on the Champs-Elysées, in Paris, which attracted exceptional interest around the globe. To coincide with the opening, Louis Vuitton launched its first collection of spectacles. Fendi harvested the fruits of its new strategy and saw its profitability increase in 2005. Similarly, Marc Jacobs and Pucci enjoyed an excellent year, thereby confirming, with Fendi, their potential as star players.
Other sectors of activity also performed well in 2005, with operating profit increasing respectively by 7% to 869 million euros for wines and spirits, by 15% to 173 million for perfumes and cosmetics, and by 46% to 347 million for selective distribution. At the general meeting of 11 May this year, LVMH will be proposing to shareholders a dividend of 1.15 euro per share, an increase of 21%.
Forecasts for 2006 meanwhile could not be more optimistic. Indeed, the group has made an excellent start to the year with sales continuing to register two-digit growth. It is therefore confident of achieving further improvements in turnover and profitability. Concerning the latter, it has even hinted at a "very significant increase in 2006 profits".
March 21, 2006
