Wine and spirits boost for LVMH
profits in the first half, helped by good performances from
Champagne and Cognac in difficult market conditions.
Excellent results from the wine and spirits arm has helped French luxury goods group LVMH to post good first half results despite difficult economic conditions.
The company, whose brands include Moet et Chandon Champagne and Hennessy Cognac, said that operating profits for the first half were up 19 per cent compared to the previous year at €840 million, on sales up slightly from €5.7 billion to €5.8 billion.
Operating profits in the wine and spirits business grew strongly during the half, rising from €220 million to €277 million helped by a 44 per cent rise in the Champagne and wine operations.
The company said that this reflected a return to normal demand levels for Champagne - a product which is notoriously susceptible to economic concerns and consumer confidence and which had been impacted in the previous year by the effects of the 11 September terrorist attacks, among other things. The group's major champagne brands, notably Dom Perignon, performed very well, particularly in the United States and the UK.
The Cognac business also improved during the half, despite the difficult economic conditions, with most of the operating profit increase coming from Hennessy in the US. The Hennessy portfolio was also extended with the launch of Fine de Cognac in Europe, while there was also further development in Hennessy's XO business in Japan.
Cognac is another product which is notoriously susceptible to economic conditions - even for a brand as strong as Hennessy - and LVMH has therefore begun to diversify into other spirits markets, notably through the acquisition of a stake in Millennium, owner of the prestigious Polish vodka brands Belvedere and Chopin.
LVMH also benefited from a strong performance from its Louis Vuitton luxury goods business, although there was a decline in sales of watches and jewellery as a result of the ending of manufacturing for brands outside the group. The selective distribution business, which includes perfume retailer Sephora and DFS Duty Free shops, performed as well as could be expected within the framework of lower tourist levels but reduced its operating losses for the half thanks to a strong performance from Sephora.
The solid first half performance allowed LVMH to remain bullish about its prospects for the rest of the year, which it said would be boosted by the launch of a number of new products in the second half. Continued efforts to cut costs, combined with store openings and intelligent management of its international business, would mean a further growth in operating profit for the second half, the company said.
