LVMH posts big sales hike, but cosmetics growth is overshadowed

Group sales for the first half of the year grew by 13 per cent to reach €10.3bn, which represented organic sales growth of 15 per cent - a particularly strong performance given the double-digit sales growth in the corresponding period for 2010.

The strong sales helped to drive the bottom line upwards, with profit from recurring operations increasing by 22 per cent to €2.22bn, in turn raising the profit margin to 22 per cent.

LVMH CEO Bernard Arnault also drew attention to the fact that it had also strengthened its long-term agreement with the Bulgari family, a move that expected to further strengthen the company’s performance in the future.

“We approach the second half of the year with confidence and are relying upon the creativity and quality of our products as well as the effectiveness of our teams to pursue market gains in our historical markets as well as in high potential emerging markets,”​ said Arnault.

High level of competition impacts cosmetics and fragrances​

Of the five divisions, cosmetics and fragrance reported a sales increase of 5 percent in reported terms for the period, to €1.52bn, an increase of 13 per cent in organic terms. The division’s profit from recurring operations remained stagnant at €181m.

The company said that the division’s profitability had been impacted by the fact that in the first half of 2010 revenue growth had been preceded by an increase in marketing expense, making the comparison unfavourable.

Although the Miss Dior and J’adore fragrances were earmarked as being strong performers during the quarter, the company did also highlight the competitive nature of the market and the fact that marketing investments continue to increase.

Dior, Givench and Guerlain all perform well​

Other product lines that were also earmarked as performing well included the new Dior Addict lipstick, as well as the Capture skin care line, while gains were also reported for Givenchy Play fragrance and Guerlain’s Shalimar Parfum.

The selective retailing division, which includes cosmetic and fragrance retailer Sephora, reported an 18 per cent increase in organic revenues, at €2.83bn.

Despite the continuing uncertainty in the global economy, LVMH expects to continue to gain market share for the rest of 2011, driven by numerous product launch and geographic expansion into markets with high potential.