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LVMH surprises marketq

Published:  23 July, 2008

By Ron Emler
Wines and spirits played a large part in increasing sales and profits at LVMH, the world's largest luxury goods company, in the first half of 2006.

Overall, the group achieved a 19% increase in profits from recurring operations and a 35% increase in operating profits, figures that easily exceeded the most optimistic analysts' forecasts. The company put on organic growth of 12% compared with the first half of 2005, with global sales rising by 13% to 7 billion (4.8 billion) with market share gains across all brands'.

The wine and spirits arm, including Mot et Chandon, Glenmorangie and Hennessy Cognac, recorded an 18% increase in sales on the back of both volume growth and price rises in major markets to improve margins. Like-for-like sales were 16% ahead. The division achieved an 11%increase in profits from recurring operations to 321 million.

The company was positive about the recently acquired brands Glenmorangie and Belvedere, and said that the wines and spirits brands had collectively achieved a remarkable performance'.

Mot Champagnes, including Dom Prignon, made further strong progress in Japan, while Veuve Clicquot was buoyant in Europe and the US. Hennessy Cognac made significant advances in the US and China, with premium qualities achieving the highest level of growth.

Analysts were pleasantly surprised by the results, especially the buoyancy of the US market for luxury goods. They were also encouraged by LVMH's reiteration that it expects a very significant increase' in its results for 2006 as a whole. It pointed to expansion of its duty free arm benefiting from the growth in Chinese tourism, while the group as a whole was reaping the benefits of expanding consumer demand in Asia.

The highly positive tone of the statement was in contrast to the more muted expectations expressed only a week previously by Diageo, which said it that it expected to at least' repeat growing organically by 7%, but noted the impact geopolitical considerations could have on its operations.

LVMH said that its revenues in July and August confirmed the continuation of the growth trend experienced in the first half of 2006 and that it expected performance to be buoyed by numerous new product launches planned to take place before the end of the year.

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