An Inelegant 2001 for LVMH

LVMH Moet Hennessy Louis Vuitton (Paris), the international luxury goods manufacturer and retailer, reported that net profits plunged by nearly 100 percent in 2001. The maker of Louis Vuitton leather goods, Christian Dior perfumes and Moet & Chandon champagne was able to remain in the black only because of the $759 million (or 864 million euros) it netted from the sale of its Gucci stake to French retailer and rival Pinault-Printemps-Redoute SA, as part of a settlement of a long-running dispute over control of the fashion house.

The company showed net profits of $8.8 million (10 million euros) in 2001 versus $635 million (722 million euros) a year earlier.

Much of the loss was due to the performance of two of its international retail outlets, DFS duty-free stores and Sephora cosmetics outlets, both hurt by the flattening worldwide economy and the travel slump following September 11. The company said its selective retail division had an operating loss of $176 million (200 million euros) compared to a gain of $1.8 million (2 million euros) a year earlier. Because the company paid cash rather than stock for much of its retail holdings (in an effort to avoid diluting the controlling stake of chairman Bernard Arnault), it was forced to take a charge of $676 million for the year in goodwill depreciation and restructuring. Some $281 million of the charge represented a write-off of good will from the 1997 purchase of DFS.

But Arnault said, “Now is not the time to sell DFS and Sephora.”

Nonetheless, Arnault said one objective for 2002 would be to dispose of “non-strategic assets.” Last month, he sold LVMH's majority stake in the Phillips, de Pury & Luxembourg auction house (which he bought in 1999 in an attempt to compete with PPR rival Francois Pinault). Sephora is closing stores and DFS is cutting 1100 jobs.

The company's luxury brands include Dom PŽrignon, Mo‘t & Chandon and Veuve Clicquot champagnes and wine); Hennessy and Hine cognacs; Christian Dior, Guerlain and Givenchy perfumes; bliss, Hard Candy, and BeneFit cosmetics lines; Christian Lacroix, Donna Karan, Givenchy, Kenzo and Louis Vuitton fashion and leather goods; and TAG Heuer, Ebel, Chaumet and Fred Joaillier watches and jewelry. Its retail holdings consist of the DFS Group, Sephora and Synchrony watch and Solstice sunglasses shops.