Strong brands and innovation boost LVMH

08 February 2010

PARIS: Strong brands and a focus on innovation have helped strengthen LVMH, the luxury goods group, in the economic downturn, Bernard Arnault, its ceo, has argued.

The French conglomerate posted a 1% decrease in revenues, to €17 billion (€23.2bn; £14.8bn), over the course of 2009 as a whole, with net profits falling by 13%, to €1.75bn.

More positively, figures improved by 1% in the final three months of last year compared with the same period in 2008, the first such uptick enjoyed by the Paris-based firm since the third quarter of 2008.

Arnault suggested LVMH's annual results demonstrated its "excellent performance given the current global economic crisis."

"This performance in 2009 was the result of the strengthening of our star brands, our flagship brands, that have all continued to increase their market share throughout the world," he stated.

Louis Vuitton, the company's leading leather goods offering, was one of its major success stories, recording a double-digit uptick in sales in 2009.

"This is due to the quality of the products, the quality of the locations, the quality of service that we provide to our customers, the extraordinary capacity for innovation of this brand … it's the only fashion and leather goods brand that doesn't offer sales," Arnault said.

Tag Heuer, its premium watch line, Hennessy cognac and Christian Dior, its fragrance and beauty unit, were also in demand, especially in key emerging economies, helping "offset" declines in business elsewhere.

By region, totals in the US, which provided a quarter of the company's sales in 2009, fell by 7% in local currency terms, but this included growth of 3% in the three months from October to December.

Europe, which is responsible for 21% of revenues, was off by a more modest 4%, while Japan, its third biggest area of operation overall, was down by 19%.

By contrast, Asia, excluding Japan, was up by a similar amount, a process largely driven by China, which is expected to become the biggest premium goods market in the world in the next five to seven years.

Looking forward, LVMH intends to launch a number of new goods in a variety of countries, including additions to its Louis Vuitton and Dior ranges, in 2010.

"This year we're of course going continue to enhance still further innovation. There's a whole slew of products in the pipeline," Arnault said.

"The business climate is rather difficult to predict," he added. "We're emerging from a strong deep crisis. Will it turn in to a strong recovery? It's difficult to state that with certainty."

Data sourced from LVMH; additional content by Warc staff