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Arnault on the Attack: Blasts Gucci’s Strategy As LVMH Net Leaps 49%

While reporting that first-half net profits at LVMH soared 49 percent, chairman Bernard Arnault said he doesn’t regret losing Gucci to PPR.

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Meanwhile, the loss-making watches and jewelry business edged out of the red ahead of schedule, posting 2 million euros, or $2.5 million, in operating profits, versus a loss of 38 million euros, or $42 million, a year ago. LVMH attributed the improvement not only to the shedding of unprofitable brands such as Ebel, but to improved lead times and new accessibly priced ranges at TAG Heuer and Chaumet.

In perfumes and cosmetics, operating profits advanced 7.7 percent to 42 million euros, or $51.5 million, versus 39 million euros, or $43.1 million, a year ago. Arnault said sales for Pure Poison by Dior are already ahead of forecast and would help drive sales in the second half, along with products from Guerlain and Givenchy.

China was also a recurring subject on Wednesday, described by LVMH as a “high-potential” market with a colossal youth population. Arnault said China could become luxury’s new Eldorado within a generation.

Louis Vuitton president Yves Carcelle noted that the brand today christens its first global store in China selling all product categories — a unit in Shanghai triple the size of the previous location.

“It’s a significant market for us,” Carcelle said. He also noted that Chinese tourists spend almost double the amount on luxury goods when they travel as they do in their home country, and as many as 49 million are expected to go abroad by 2008.

Also, in one of many compliments to Vuitton creative director Marc Jacobs, Carcelle noted that sales of the brand’s ready-to-wear doubled in August versus a year ago, due to the strength of the collection and timely deliveries.

Shares in LVMH inched up 0.1 percent in trading Wednesday to close at 55.30 euros, or $67.80, on the Paris Bourse.
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