LVMH reports increase in demand for luxury goods

LVMH, the world s biggest luxury goods group by sales, provided further evidence of a recovery in the industry on Thursday as it reported demand for expensive watches, bags and clothes accelerated towards the end of last year.

Bernard Arnault, chairman and chief executive, said the sales trend was stronger in January than in the final quarter of 2009, although he refrained from giving guidance for the year ahead, citing the uncertainty of the strength of the economic recovery.

The Paris-based group reported a 1 per cent rise in sales to 5.1bn ($7bn) in the three months to December 31, compared with the same period in 2008. A record level of revenue was achieved in December, it said, without providing the exact figure.

The 1 per cent rise in organic terms excluding acquisitions was the first quarterly increase since the third quarter of 2008. It was driven by continued strong demand for the flagship Louis Vuitton leather goods business which accounted for 59 per cent of group operating profits last year particularly in Asia. Sales of Louis Vuitton grew by double-digits last year.

Group sales to Asia, excluding Japan, rose by 19 per cent in the quarter, while the US turned positive for the first time last year, with a 3 per cent increase in sales.

The group, whose brands also include Donna Karen, Dior perfumes and Dom P rignon champagne, reported a 1 per cent fall in sales for 2009 as a whole to 17.1bn, while net profit dropped by 13 per cent to 1.76bn. Operating profit margin was 20 per cent, little changed from 21 per cent in 2008.

To the question of the group s interest in acquisitions, Mr Arnault answered that the priority was on organic growth. We ll see. Prices are still very high.

He added: 2010 will remain a difficult year but the trend is improving , adding that Europe would probably take longer to recover than other parts of the world.

Luxury groups Tiffany, Richemont, Burberry and Swatch have all reported a stronger second half of 2009.

In wines and spirits, demand for LVMH s Hennessy cognac recovered in the final quarter as the strong trend of destocking in the first half of 2009 eased towards the end of the year. But demand for champagne remained depressed, leading to a 28 per cent fall in operating profits for the division in 2009 to 760m.

Demand for watches and jewellery recovered in the final quarter, seeing a 4 per cent rise in sales.