Attacks wipe out LVMH profits

PROFITS of the world's largest luxury goods group, LVMH, have been wiped out in the aftermath of the 11 September terrorist attacks on the US. Falling sales and a swathe of write-downs have left the company barely in the black with an insignificant net surplus of e10m (£6m) for 2001. This is down almost 99% on the e722m it earned the previous year.

The worst of the damage was caused by LVMH's chain of DFS luxury shops at airports and its Sephora perfume and cosmetics chain. The retailing division, including DFS, lost e194m.

Operating profits from wines and spirits, including Hennessy cognac and the Moet & Chandon and Veuve Clicquot champagne brands, fell from e716m to e676m, and profits on watches and jewellery halved to e27m. Only fashion and leather, headed by Louis Vuitton, Christian Lacroix, Thomas Pink and Fendi, continued to increase sales.

Group operating profits slipped more than a fifth to e1.56bn, on sales down 5% to e12.2bn. The figures were in line with expectations after three successive profits warnings. But for an exceptional profit of e864m from the sale of the group's stake in Gucci to rival Pinault Printemps Redoute, the performance would have been much worse. The one-off profit was dwarfed by bigger-than-expected total provisions of more than e1.48bn at the group headed by Bernard Arnault, France's richest man.

Although the scanty figures provide only the barest detail, LVMH said the company had written off e323m of goodwill at DFS, and taken a further e446m provision for Sephora, which is withdrawing from Japan and Germany.

Meanwhile, there is an unexplained provision of e189m, apparently largely arising from the sale of 27% of the LVMH stake in art auction house Phillips to management two weeks ago.

In addition, it has written off e180m for the fall in value of its investments, including French construction group Bouygues, internet and media businesses, and a stake in Alain Prost's defunct Grand Prix racing team. There is also a e343m write-off for a holding of its own shares.

LVMH said it was taking radical steps to cut costs and to continue building its brands in the face of slowing demand, with the aim of increasing operating income in 2002.