Dior Maker LVMH's 2007 Net Profit Rises 8%
LVMH, the world's largest luxury goods group, brushed aside concerns that a U.S. recession could dent its performance but sounded more cautious about 2008 as it unveiled an 8 percent rise in 2007 net profit.
LVMH Moet Hennessy Louis Vuitton Chairman Bernard Arnault told a presentation on 2007 results that a mild U.S. recession would have a "limited...even non-existent" impact on the group thanks to demand elsewhere but LVMH nudged down its outlook.
In a statement, LVMH said it was expecting a "tangible" rise in 2008 results compared with the "significant" rise it predicted for 2007 at the same point in time last year.
The downbeat tone weighed in early trade on LVMH's share, which fell as much as 3.6 percent. However, the share recovered some ground after Arnault's comments.
Shares of LVMH were flat on a slightly positive CAC-40.
In an initial reaction to the figures, Merrill Lynch said it assumed the LVMH guidance meant operating profit growth of between 8 and 12 percent, noting its own forecast was for 9.6 percent.
The maker of Dior perfumes, Moet & Chandon champagne and Fendi clothes said 2007 operating profit rose 12 percent to 3.56 billion euros ($5.27 billion), beating market expectations for 3.49 billion euros. Sales rose 8 percent to 16.48 billion.
Excluding currency swings, operating profit would have risen 20 percent.
However, its 2007 net profit of 2.03 billion euros was slightly below a 2.10 billion-euro average forecast of 23 analysts polled by Reuters Estimates.
LVMH said it booked a loss of 81 million euros on the sale of La Tribune newspaper and other assets and that its debt service costs also rose.
Arnault sought to calm fears that a slowdown may already be underway, saying the group had posted "double-digit" organic growth in sales in January, in line with its performance at the end of 2007.
Louis Vuitton, its leather goods arm and most profitable business, also posted double digit percentage growth in January, he said.
The company said underlying sales grew 13 percent in the fourth quarter after a rise of 15.5 percent in the third quarter and a 12 percent increase in the first six months of the year.
"The customers we serve are much less affected by these movements in the economy. They have a relatively high level of purchasing power and live in countries where growth will remain strong even if there's a small or medium-sized recession in the United States," Arnault said.
He said he was baffled why financial markets continued to treat LVMH as a cyclical company.
All LVMH's main business units posted double digit percentage growth in operating profit in 2007 and the group proposed a 14 percent rise in its 2007 dividend to 1.60 euro per share.