Muted shopping sprees hit LVMH profits

Moet & Chandon sales lost their sparkle

LVMH, the world's biggest luxury-goods group, has reported a 98% slump in net profits.

But the group described its performance as "resilient" in the face of the global economy slowdown.

Profits fell to just 10m euros (£6.2m; $8.8m) in 2001, compared with 722m euros the previous year, far below analyst expectations.

LVMH is a 50-brand powerhouse of luxury labels ranging from Givenchy fashions to Christian Dior perfume and Louis Vuitton handbags.

Muted spending sprees

The group warned that its profits would fall below target on five separate occasions last year.

Luxury goods are often the first shopping item to be axed when consumers face economic uncertainty.

The downturn in the market was then compounded by a sharp fall in the number of tourists - prime targets for the sale of expensive merchandise - following the 11 September terrorist attacks.

A wide variety of products suffered a slump, while the new chain of Sephora perfumes and cosmetics shops weighed on the group's profitability.

Champagne was also a problem area, dragged down by a glut of stocks dating back to the Millennium celebrations.

Bright future?

But the group insisted it was well positioned to face 2002 and to benefit fully from any upturn in the market.

"As in previous crises, our broad geographical presence, the strength and complementarity of our brands and our exceptionally talented teams will enable the group to gain market share," the firm said in a statement.

There was already some support for LVMH's optimistic outlook, with sales in the first two months of 2002 rising 9% over the same period the previous year, the firm said.

And the group's leather goods brand, Louis Vuitton, has continued to be a cash cow.

It was the only division to report an increase in operating profits last year, with earnings rising 9% to 1.23bn euros.