They warned and warned and warned, and then blew it.
Luxury giant LVMH Moet Hennessy Louis Vuitton made the unprecedented move of warning three times that it would miss earning estimates. Then it missed the mark.
The conglomerate’s earnings fell 20 percent to $1.4 billion for fiscal 2001 versus an expected 15 percent. Though the company was able to increase sales 5 percent to $10.9 billion, it blamed its losses on the tourist industry, which was hit hard in the aftermath of the World Trade Center attacks.
Luxury king Bernard Arnault’s company is loaded with high-end labels like Dom Perignon champagne and Hennessy cognac in its spirits division, Celine, Louis Vuitton and Marc Jacobs in its fashion division and the retail chains Sephora and DFS duty-free shops.
The businesses, though established, depend greatly on tourists and are highly susceptible to fluctuations in the world economy, especially because 10 percent of all luxury purchases are made by travelers.
Still, the company believes there were positives in 2001. The year “demonstrated the value of our entrepreneurial teams and philosophy,” said LVMH’s Toni Belloni, group managing director.
“We have adjusted quickly to the changing environment to maintain the competitiveness of our brands.”
And the company’s outlook, should it retain any credibility in analysts’ eyes, is rosy for 2002.
“The depth of our management talent and our enriched stable of great brands make us confident that we are well positioned to strengthen our leadership in the global market for luxury goods,” Belloni added.
However, the company faces an uphill challenge with recent acquisitions Fendi and Donna Karan.
Fendi, which was reborn several years ago with its “Baguette” handbag, is desperately looking for the next thing to keep it in with fashionistas.
And Donna Karan’s operations may be a bit more mucky than LVMH expected. The company is embroiled in a lawsuit with John Idol, Donna Karan’s former chief exec, over his payout from the company.
Idol is charging breach of contract, while LVMH is charging poor performance while under contract.