A negative currency impact of about 11 percent hurt the performance of the luxury giant, which saw sales fall 5.2 percent to $3 billion in the three months ended March 31.
However, analysts and the company pointed to "organic" growth, excluding currency shifts and all but continuing operations, of 6 percent as the more telling figure, suggesting the French group is showing good resilience in the face of a difficult environment.
Indeed, sales of Louis Vuitton advanced at a double-digit pace last week in Hong Kong, chief financial officer Patrick Houël told analysts during a conference call. Taking pains to downplay the impact of SARS, he noted that together, Hong Kong and Singapore, hit hard by the crisis, represent only 6 percent of its total business.
Houël said a drop in global travel because of SARS and the war in Iraq have only impacted DFS, which saw sales drop 6 percent in March. But other regions fared well, with group sales up 10 percent in the U.S. and Japan up 15 percent. In the U.S., LVMH’s sales of wines and spirits advanced 10 percent; fashion and leather goods, 11 percent; Louis Vuitton, 28 percent, and Sephora, 17 percent. While all divisions experienced sales declines in net terms, only the watches and jewelry unit posted an organic sales drop.
LVMH isn’t slated to disclose first-half profits until September, but reiterated Wednesday its objective of "further tangible growth of operating income in 2003 and giving priority to cash generation."
And it also pointed out currency effects would not hurt its bottom line in the quarter, noting that efficient global hedging enabled it, led by Vuitton’s double-digit quarterly increase, to post "an increase in operating income exceeding our expectations at the beginning of the year." Analysts estimated an increase in operating income in the range of 10 to 15 percent.
Sales in the fashion and leather goods division slid 1.2 percent to $1.15 billion, versus $1.16 billion a year ago, but were ahead 9 percent in organic terms. Vuitton led the pack, with LVMH citing waiting lists around the world for new handbags designed by creative director Marc Jacobs in collaboration with Japanese artist Takashi Murakami, as well as for its Tambour watch.