LVMH Perfumes & Cosmetics Operating Profit Up 10.6% In 2003
This article was originally published in The Rose Sheet
Executive Summary
LVMH's Perfumes & Cosmetics business generated a 10.6% increase in operating income to reach $215.2 mil. (€1=$1.21) for 2003, largely on the strength of Christian Dior Parfums, the firm reported in a year-end earnings release March 3
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LVMH's Perfumes & Cosmetics business generated a 10.6% increase in operating income to reach $215.2 mil. (€1=$1.21) for 2003, largely on the strength of Christian Dior Parfums, the firm reported in a year-end earnings release March 3. Christian Dior "continued to record high profitability" due in part to the performances of the Dior Addict fragrance and Capture R60/80 skin care range, which was repositioned early last year to become the LVMH unit's core anti-aging skin care collection. Perfumes & Cosmetics income also benefited from the "continued development" of fragrances including Christian Dior J'Adore , Guerlain L'Instant de Guerlain , Givenchy Very Irresistible and Parfums Kenzo's Kenzo Air , according to the company. Additionally, the U.S. cosmetics business BeneFit "demonstrated its very profitable development with double-digit sales growth," according to LVMH. The earnings report coincided with news that Perfumes & Cosmetics division President Patrick Chöel retired, effective March 1. The exec, who has worked for the company for about eight years, will continue to serve the unit as an advisor, Group Managing Director Antonio Belloni said during a March 3 analyst meeting. A successor will not be appointed, and "for the moment we are not setting up or recreating a new brand or division," Belloni noted. Rather, "all the synergies between R&D, sales around the world, advertising, purchasing logistics, etc...will be maintained and coordinated by Christian Dior," he said. Parfums Christian Dior, which is headed by CEO Claude Martinez, already has acted as "coordinator" for many brands in the Perfumes & Cosmetics group, the exec pointed out. Moving forward, the LVMH division has planned an "ambitious" innovation program "both in terms of aesthetics and also technological innovation" in perfumes, cosmetics and new skin care," LVMH Chairman and CEO Bernard Arnault stated. Dior will lead the division with a number of launches, including a new women's perfume and products that "strengthen" the brand's skin care business, according to LVMH. Dior currently is rolling out new skin care, cosmetics and fragrance products to a tightened distribution network; the firm is in the process of cutting 100-150 unprofitable beauty doors in the U.S. this year (1 (Also see "Dior’s Got Spring Fever With Launches In Skin Care, Makeup, Fragrance" - HBW Insight, 26 Jan, 2004.), p. 3). "Parfums Dior will also start a new concept on its outlets both innovating and in terms of qualitative change," Belloni noted. The company said it will introduce new sales counter concepts for the Dior, Guerlain and Givenchy ranges that are "designed to enhance" the images of the brands. The Perfumes & Cosmetics division also is planning to launch Givenchy Le Makeup cosmetics and a new men's fragrance under Guerlain in September. The firm will "pursue development of BeneFit and Fresh ," with new products and new distribution outlets, the company said. As part of its focus on profitability and core brands, LVMH has sold off several niche U.S. brands recently, including Hard Candy , Urban Decay , and Bliss , as well as the fragrance licenses for Michael Kors , Marc Jacobs and Kenneth Cole . LVMH reported sales of the Perfumes & Cosmetics division earlier this year, with revenues up 4% to $2.77 bil. for the year on an organic basis but down 7% including currency and divestitures (2 'The Rose Sheet' Jan. 26, 2004, In Brief ). Operating income for LVMH's Selective Retailing unit experienced a big boost, reaching $128.1 mil., versus $24.2 mil. in the prior year, the firm said. An ongoing "rigorous" cost reduction plan helped offset lower sales during the year. Sephora improved its operating performance in the U.S. and Europe during the year, with the retail business reaching its goal of profitability in the U.S. for the first time, according to LVMH. "In the U.S., we want to make that business more profitable, maintaining high growth," LVMH said. "This means double-digit growth in sales on a like-for like-basis, extending our network and also improving the leadership position of the dot come business," the firm added. |