Paris—Saying it is “well equipped” to continue growth this year, LVMH said Friday that sales in Asia and demand for its Louis Vuitton brand helped it beat its full year profit forecast.
“Despite an uncertain economic environment in Europe, LVMH is well-equipped to continue its growth momentum across all business groups in 2012,” the company said its earnings statement.
The world’s largest luxurygoods group said its 2011 net income rose 1% to 3.07 billion euros (about $4 billion) exceeding analysts’ average estimate expecting income of 3.06 billion euros. Although the increase seemed small, LVMH noted that its 2010 profits were inflated by a 745 million euro profit from its stake in Hermès. Without that gain, 2011 net profit would have soared 34%.
Total sales climbed 16% to 23.7 billion euros on a reported basis and 14% excluding the effects of acquisitions and currency shifts, the company said. Again, the sales target beat analysts’ average estimate for 23.4 million euros.
“2011 was another great vintage for LVMH, highlighting once again the power of our brands, the excellence of our craftsmanship and the appeal of our products,” said Bernard Arnault, chairman. “Our businesses enjoyed excellent momentum and profit from recurring operations passed the threshold of 5 billion euros for the first time. The agreement with the Bulgari family was one of the key moments of the year. In 2012, LVMH intends to further strengthen its global leadership position in high quality products by relying on its sound, long-term strategy.”
Bulgari Boosts Results
Its fourth quarter revenue climbed 20%, or 12% excluding acquisitions and currency shifts. Growth in fourth-quarter revenue was led by the selective distribution unit, which includes DFS duty-free shops and the Sephora, where sales rose 24% to 2.06 billion euros.
Sales at its fashion and leathergoods division increased 19% to 2.52 billion euros, while wine and spirits sales advanced 9.4% to 1.22 billion euros. Besides its Louis Vuitton brand posted a record year, LVMH noted that all of Fendi’s product categories delivered excellent performances. “The star line Peek-a-boo, which demonstrates the savoir-faire of the mason, remained a landmark collection for the brand,” the company said. Donna Karan grew in the United States, “confirming their brand identity with full force.” Celine, Loewe and Givenchy also showed “remarkable momentum.”
Thanks to its acquisition of Bulgari, LVMH’s watches and jewelry business posted 1.95 billion Euros (about $2.56 billion) in sales during 2011, a 98% increase on a reported basis. LVMH added that revenue for this division rose 23% on an organic basis, which includes comparable-store sales and exchange rates.
Profits from recurring operations for the watches and jewelry business grew 107% to 265 million euros (about $348.5 million) again, largely due to the Bulgari acquisition. Factoring in comparable-store sales, the segment’s profits grew by 41%, the company added.
The LVMH watch brands, including TAG Heuer, Hublot, and Zenith, continued their sustained growth across all geographies.
“Bulgari’s excellent performance across all categories confirmed the considerable appeal of its products,” LVMH said. “The collections, which were developed around the theme Serpent, a symbol for the brand since the 1950s, were “very well received.” Driven by the strong momentum at their network of stores, the other jewelry brands Chaumet, De Beers and Fred, continued to develop.
LVMH said also announced it will propose a dividend increase of 24% to 2.6 Euros a share at a shareholders’ meeting on April 5.
The results appeared to reassure retail analyst who speculated that concerns over the Euro zone debt crisis could trigger a slowdown even in emerging markets such as China that have been offsetting weaker trends in Western Europe and North America.
“It’s somewhat of a paradox to say that 2011 was a year of global prosperity, but we are lucky to export most of our products,” Arnault said.
Once again Arnault reiterated that LVMH’s 22.3% stake in Hermès remained “friendly.” Descendants of the Hermès founding families, who are majority shareholders, created a majority holding company to protect Hermès from a hostile takeover as a result.