Financial Desk: Strong Gains in Q1 Portend Bright 2008 For LVMH

In the words of one Flavor-Flav, LVMH Chairman and CEO
Bernard Arnault "knows what time it is."

Remember when the luxury house's head honcho (pictured, right), whom we've always thought was like a lost member of the Rat Pack, said this, a while back?

"I believe that [the recession's] consequences on LVMH will be limited, weak, or even non-existent. In fact, the clientele that we are dealing with is far less affected than the rest of the economy by these short-term economic swings.  They have high purchasing power, located in a number of countries where the economic climate will be bouyant, even if there's a minor recession in the U.S."

Well, he wasn't just puffing his sails. First quarter revenue reports show that, with the sole exception of the wine and spirits group, all divisions of LVMH are up.

Fashion and leather goods grew 7%, led by the strength of Louis Vuitton, which received its own TV commercial this quarter, in addition to recently inking a deal to have Rolling Stones' guitarist (and, we think, animatronic wax doll) Keith Richards star in its current print campaign. On the product front, the company said that the collaboration between Marc Jacobs and Richard Prince (the artist of "Let's not and say we did, XOXO, Jennifer Aniston" fame) was particularly successful. Meanwhile, perfumes and cosmetics grew 8%, attributed to the continued momentum of the Christian Dior brand offerings, as well as the new Midnight Poison fragrance and Addict High Shine lipstick.

But the real winner of the quarter was the watches and jewelry group , which posted 12% revenue gains over the year-earlier period. Strength came from brands including TAG Heuer, Zenith and the Christal collection from Dior. The company added that Chaumet and De Beers also continued their retail expansion plans and increased revenues. New watches previewed at Art Basel in Switzerland have reportedly attracted "large increases in orders" from retailers.

And the bottom kicker of the sales release seems to only confirm what Arnault had promised earlier:

"LVMH will continue its growth in 2008 despite the challenging monetary environment and an uncertain economic climate at the beginning of this year. Increasing market share and the profitability of its leading brands as well as improving the results of its developing companies remain LVMH top priorities."

If they can keep these numbers up, or better yet, best them, then we think it's fair to say that the strategy we outlined a while back, that of weathering the recession by only appealing to the top end clientele, has indeed proved not only stable, but a money maker for LVMH.

Comments

[george]

(Antounians v. Louis Vuitton et al, Los Angeles County Superior Court, Case No. BC396340).
A brother and sister who operated a retail store on the Santee Alley bargain strip in the Fashion District of Downtown say they were falsely accused of dealing in counterfeit merchandise and forced out of business by “malicious prosecution” pressed by representative of the Louis Vuitton and Christian Dior fashion labels.

George and Marijeanne Antounian recently filed a lawsuit against the two Paris, France-based luxury brand giants and their attorneys. The Antounians claim that a prior suit that the companies filed against them was itself unlawful.

A federal court eventally dismissed the lawsuit against the Antounians and awarded them approximately $70,000 in lawyer’s fees. That covered about half of what they spent on legal representation in fighting the case, according to a lawyer representing them in their suit against the luxury brands.

The Antounians are seeking unspecified damages from the companies in a malicious prosecution suit alleging that representatives of Louis Vuitton and Christian Dior, and their respective lawyers, knew that allegations of copyright and trademark infringement against them were not true but nevertheless continued with the litigation.

The cost of the defending against the charges eventually forced the Antounian’s to close their Bijou Palace shop on the 1100 block of Santee Alley, according to the couple, who claim they were also forced to liquidate their inventory, a process that typically involves selling off merchandise at very low prices.

The Antounian’s malicious prosecution lawsuit claims that representatives of the two giant luxury labels hired a private investigation company called Investigative Consultants in 2005 to determine whether stores on Santee Alley were selling counterfeit Louis Vuitton and Christian Dior wallets, purses, and other goods. An investigation of nearly two years led to the firm to wrongfully conclude that the Antounians had sold fake Louis Vuitton and Christian Dior products, according to the lawsuit. The Antounians claim that a video used in the investigation showed such counterfeit transactions occurring at adjacent stores and on the pathway of Santee Alley itself, but not at Bijou Palace.

“The Antounians’ store sold only costume jewelry and was not in the business of selling purses and wallets,” said Sean Macias, managing partner of Macias Counsel, Inc. in Glendale, and the lead attorney representing the Antounians.

William Salle, co-counsel for the Antounians, said that a member of the investigation team, Arianna Ortiz, admitted she provided false testimony in identifying Bijou Palace as one of the stores selling knockoff products.

“Ortiz alerted Kris Buckner, president of Investigative Consultants, and lead counsel Janine Garguilo for Louis Vuitton and Christian Dior, of the errors in the investigation reports months before trial, but legal action still proceeded against the Antounians,” according to Salle.

The Antouians lawsuit also alleges that during a trial on accusations against them, in July 2007, Buckner testified that he never saw handbags, wallets, or sunglasses—or any Louis Vuitton or Christian Dior items—for sale at Bijou Palace.

“These were the same items that the Antounians and Bijou Palace were to have allegedly sold,” said Salle.

Macias said that efforts to combat counterfeiting of merchandise are understandable, but contended that his clients were wrongly caught up in the efforts.

“Maybe they wanted to send a message to would-be counterfeiters that they mean business,” Macias said. “Instead, Louis Vuitton and Christian Dior succeeded only in destroying an innocent small business.”