INTERNATIONAL. LVMH Moët Hennessy Louis Vuitton today revealed a +13% leap in revenue year-on-year to €42.6 billion, with organic growth at +12%.
Within this, the Selective Retailing arm, which includes DFS Group (plus Starboard Cruise Services, Sephora and Le Bon Marché Rive Gauche department store), reported +11% growth (+13% in organic terms), with profit from recurring operations up +17%. LVMH noted: “The year 2017 was a positive turning point for DFS, with better positioned markets, especially in the second half. The new stores in Cambodia and Italy (Venice) continued to grow.”
Elaborating on DFS’s performance, LVMH noted the positive impact on profitability that will result from DFS’s exit from its core category concessions at Hong Kong International Airport (HKIA) in late 2017.
Citing the DFS agreement at the airport, LVMH said that the concession fee was €430 million in 2017, the contract’s final year.
The group said: “The expiry of the loss-making concession at Hong Kong International Airport at the end of the year will help to increase profit in 2018.”
In its commentary on the annual performance, LVMH added: “DFS turned a positive corner in 2017, thanks to more buoyant markets, especially in the second half, while also reaping the rewards of its cost control efforts over the past two years. The recovery in revenue, particularly strong in Hong Kong and Macau, was boosted by high-impact marketing campaigns, continuous improvements in store offerings, and digital initiatives designed to better serve travellers.”
The company noted that investments in the retailer’s T Galleria stores as well as its airport locations continued, with work completed at the Sydney store and renovation projects launched at stores in Hong Kong and Auckland.
Among the highlights of last year, said LVMH, was the “ramp-up of new stores in Cambodia and Venice, a fourth DFS Wines & Spirits store at Singapore Changi Airport, an agreement to operate luxury boutiques at Kansai International Airport in Japan and the [renewal of the] concession held at San Francisco International Airport for a further 14 years.”
Looking ahead, LVMH noted: “DFS will move forward with its expansion strategy while strengthening its digital marketing campaigns, to reach out and stay close to international travellers wherever they may be. Building on its success, the Loyal T rewards programme will be rolled out to more destinations.”
Of Starboard Cruise Services, it noted the expansion to new cruise routes in Asia, investment in store upgrades and a refinement of the offer for different customer segments.
“Starboard Cruise Services will fine-tune its offerings by cruise route to an even greater extent, as it invests in transforming its stores to win over customers and offer them unique experiences,” said the group.
All other LVMH business groups recorded double-digit organic growth with the exception of Wines and Spirits, whose growth in the second half was limited by supply constraints.
Grup profit from recurring operations reached €8,293 million in 2017, an increase of +18%. Operating margin reached 19.5%. Group share of net profit was €5,129 million, representing growth of +29%.
LVMH Chairman and CEO Bernard Arnault said: “LVMH achieved another record year. The excellent performance, to which all our businesses contributed, is due in part to the buoyant environment but above all to the remarkable creative strength of our brands and their ability to constantly reinvent themselves. Continued innovation, entrepreneurial spirit and the quest for excellence: all Maisons continue to assert these core values while maintaining rigorous execution of their strategies on the ground. In an environment that remains uncertain, we can count on the appeal of our brands and the agility of our teams to strengthen, once again in 2018, our leadership in the universe of high quality products.”
The Wines and Spirits business group reported revenue growth of +5% (organic growth was +7%), with profit from recurring operations increasing by +4%. Champagnes grew steadily, with volumes up +4%. With 7.5 million cases of Cognac shipped in 2017, Hennessy’s volumes increased by +8%, with significant growth in China and the USA despite supply constraints in the second half. Colgin Cellars, a Californian wine estate, and Woodinville whiskey were added to the business group last year.
The Fashion and Leathergoods business group reported a +21% revenue rise and achieved organic revenue growth of +13% in the year. Profit from recurring operations increased by +27%. Louis Vuitton continued to demonstrate “outstanding creativity,” said LVMH. New products arising from collaborations with the artist Jeff Koons as well as the Supreme brand, the launch of the first LV smart watch and the inauguration of the Maison Louis Vuitton Vendôme in Paris were among the key events of the year.
Christian Dior Couture, whose business became fully consolidated within the group in the second half, achieved what LVMH called “an excellent performance”. Fendi continued to grow strongly. Loro Piana, Céline, Loewe, Kenzo and Berluti made “good progress”. Marc Jacobs strengthened its product offering and continued its restructuring while Rimowa completed its first year within the LVMH Group.
The Perfumes & Cosmetics business group recorded organic revenue growth of +14%. On a reported basis, revenue growth was +12% and profit from recurring operations increased by +9%. Parfums Christian Dior grew market share in all regions, driven by its fragrance Sauvage and the leading scents J’adore and Miss Dior. The makeup segment grew strongly, driven by the Rouge Dior and Dior Addict lines, noted LVMH. Guerlain benefited from the launch of Mon Guerlain and the international roll-out of Guerlain Parfumeur boutiques. Make-up helped drive strong results at Parfums Givenchy, while Benefit was lifted by the showing of its Brow Collection. Fenty Beauty by Rihanna, launched worldwide only at Sephora, has proved an “exceptional success,” said the group.
The Watches & Jewelry business group recorded organic revenue growth of +12%, with a reported rise of +10% and profit from recurring operations up by +12%. Bvlgari achieved an “excellent performance”, said LVMH, and continued to gain market share. Growth was particularly strong in Asia, the USA and Europe. In the watch sector, TAG Heuer and Hublot continued to grow. At TAG Heuer, a new generation of smartwatch with multiple customisation possibilities was a launch highlight in 2017, said the group.
Looking to 2018, LVMH said in a statement: “In an environment that remains supportive at the beginning of the year and despite unfavourable currencies and geopolitical uncertainties, LVMH is well equipped to continue its growth momentum across all business groups in 2018. The group will maintain a strategy focused on developing its brands by continuing to build on strong innovation and investments as well as a constant quest for quality in their products and their distribution.
“LVMH enters 2018 with cautious confidence, and once again, sets an objective of increasing its global leadership position in luxury goods.”