Strengthen, develop, anticipate
We approach the coming months with confidence and determination, buoyed by excellent results in 2006, the strengthening of our foundations and the opportunities offered by our numerous growth drivers. The future of LVMH is being built upon solid foundations and exceptional brands. Its long-term vision, its ability to anticipate and the talent of its teams will enable our Group to reinforce its position as the global leader in luxury goods.
2006 has been an excellent year for LVMH with record sales across all its business lines and geographic regions, strong growth in profits, and further debt reduction. Our Group has gained market share in all of its activities and has reinforced its position as the leader in its market. In an unfavourable currency environment whose impact was mostly felt in the second half of the year, we have gained one point of operational margin for the second year running and the Group share of net profit has increased by 30 per cent.
Once again, our teams have performed remarkably this year. Our Wines and Spirits houses have well managed the increased product quality and range and strong growth in volumes. Our Fashion and Leather Goods businesses have performed exceptionally in Europe, Asia and the United States. The Perfume and Cosmetics brands have once again gained market share from their competitors. The Watches and Jewelry business group has undeniably continued the successful recovery which has mobilized its teams in recent years. The Selective Retailing companies have become more competitive and this business group has further improved its profitability.
A growing success with customers reflecting the world?s diversity
The international expansion of our activities is particularly notable. We sell products from the best traditional crafts with growing success on every continent. Our brands are the leading ambassadors of this excellence with customers from very diverse origins and cultures. In the United States, the leading luxury goods market where demand is very strong, LVMH has almost quintupled its sales over ten years. In Asia, our progress year on year demonstrates our success with the increasing numbers of consumers in the region who are accessing the luxury goods market and recognizing quality. Today in China, for example, we lead in several areas thanks to the investments the Group had the foresight to make in a market with rapidly increasing influence. Our progress in Europe is also notable, proving the solidity of our heritage and the loyalty of our clients in the regions where our crafts and the culture of luxury first originated. LVMH?s home continent has also, of course, its own new markets in the Central European countries, and in particular Russia, where there is strong potential. Europe also profits from an increasing influx of tourists, fuelled in particular by China and Russia.
Strengthened foundations
Another point I would like to draw attention to is LVMH?s capacity to well manage the strengthening of its leadership both in its traditional trades - those of champagne, cognac, leather goods and perfumes - and the development, with a momentum of profitable growth, of some of its more recent activities, such as selective retailing, watch-making and jewelry. Another example is that of Moët Hennessy?s success in developing a range of exceptional wines at Estates & Wines. Such successes enable us, year after year, to reinforce the Group?s foundations.
A richer and more vibrant heritage than before, together with an enlightened ability to anticipate in order to build the future
We are approaching 2007 with confidence and with renewed energy despite a currency environment which remains difficult. Our business will be carried forward by strong innovation in all of our business groups, development of new product categories and continued investment in distribution in markets with strong potential. These developments expected in the following months enable us to fix a new Group objective of a significant increase in its 2007 results.
LVMH will be 20 years old in 2007. Throughout the last two decades, the Group has developed and deployed a consistently successful and unique long-term growth strategy. It has remained close to this strategy while at the same time continuing to respond to and anticipate an ever-evolving world. From its inherited values, the Group has created an even more vibrant cultural heritage on which to base its future. The strength of the LVMH?s leading brands: Louis Vuitton, Christian Dior, Hennessy, TAG Heuer, Fendi, Moët & Chandon, Dom Pérignon and Sephora, give the Group a competitive advantage which it intends to strengthen as time goes on. In each of its activities, rising stars are confirming their potential as growth drivers for LVMH. The future of our Group is full of exciting challenges and new opportunities in a market that has strong potential and a positive outlook. The rigorous pursuit of LVMH?s growth strategy, the creativity and quality of its products, the talent of its craftsmen and designers, the efficiency of its marketing teams will enable the Group to increase the lead over its competitors in the luxury marketplace.
LVMH?s sustainable development strategy is imbedded in the Group?s long-term value and future. The Group adheres to the United Nations? Global Compact whose objectives form an integral part of its development strategy. LVMH is dedicated to being a business of the community, one that respects the wellbeing of its contemporaries and that of future generations. We will continue to take the social and environmental implications of our activities very seriously. Furthermore, over the last fifteen years, we have developed our patronage program to focus on creative projects that bring cultures and civilizations together. We wished to make this commitment more permanent and give it an appropriate framework. The birth of the Louis Vuitton Foundation for Creation, announced in October 2006, is a project of which we are as proud as we are of our results. I would like our shareholders, our business partners and our clients across the world to share this pride and I thank them for having made this project possible.
14 February 2007
Bernard Arnault
Chairman and Chief Executive Officer
