Strong cosmetics growth but profits disappoint at LVMH
6 per cent sales growth in its first half, boosted significantly by
fragrance sales within its fragrance and cosmetics division, but
despit this profit figures fail to shine.
Overall the company recorded first half revenues of €7.41bn, compared to €6.96bn for the same period a year earlier, across all its divisions, which also include wines and spirits, fashions and leather, watches and jewelry, and selective retailing. However, the company's net profits did not reflect the rise in sales, increasing by only 2 per cent from the first half figure last year, to reach €834m, a figure that was below market expectations of a 3.5per cent rise. News of the results caused the company's share price to fall slightly during early trading on the Paris Bourse today, with shares currently trading at around €80. Emphasising the continued strong performance of the group's brands, LVMH CEO Bernard Arnault chose to stress the 19 per cent increase in the group's operating profits. "Numerous product launches, geographic expansion in targeted, high potential markets and growing success with new clients should allow LVMH to continue its progress in the second half of the year in a favorable economic environment. All these elements enable us to confirm our objective of a significant increase in results for 2007," Arnault said. Looking at the group's fragrance and cosmetics division, reported sales revenue increased by 8 per cent to €1.17bn, a rise of 13 per cent in organic terms. However, where the division really shone was the improvement in its operating profit, which was up 37 per cent to reach a figure of €108m during the first six months, reflecting an emphasis on cost cutting measures across the whole company. In particular sales for Parfums Christian Dior grew significantly during the period, in turn helping to push market share further, with strong sales for J'Adore and Miss Dior Cherie fragrances providing the main driving force. Also under the Christian Dior umbrella, new fragrance launches included Fahrenheit 32, while the new rouge Dior and Capture skin care line also contributed to the growth. Successful roll-outs also included Guerlain and KenzoAmour, while the company said that the debut of Ange ou Demon at Givenchy had also made a significant contribution. Selective retailing, which also includes the Sephora cosmetic and fragrance outlets, increased sales by 5 per cent to $1.89bn, with the company stating that Sephora had continued to grow at a 'robust rate', in turn increasing profitability. Looking ahead to the full year, the group said that the first half results had given it the confidence to assume that there would be a 'significant increase' for the full year 2007 results.