LVMH First-Half Profit Rises 2%, Lifted by Sales of Watches

Written by James Matthews

LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, said first-half profit rose 2 percent as sales of Dior and Tag Heuer watches climbed.

Net income gained to 834 million Euros ($1.14 billion) from 817 million Euros a year earlier, the Paris-based company said today in a statement on its Web site. That missed the 840 million-euro median of 12 analysts’ estimates in a Bloomberg survey. Sales advanced 6 percent to 7.4 billion Euros.

Watches led growth in the 160 billion-euro luxury-goods industry as orders from bankers and wealthy Chinese and Russians outstripped supply. Gains from sales of timepieces may be offset this year by a weaker dollar and yen. LVMH also faces sluggish demand for its Hennessy cognac and Louis Vuitton clothing in Japan, where consumer confidence is at the lowest since 2004.

“The underlying luxury-goods business continues to perform well, but the negative impact of foreign-exchange factors is pronounced,” Scilla Huang Sun, who manages a $430 million luxury-goods fund for Clariden Bank in Zurich and owns LVMH shares, said before the report.

The weaker dollar and yen clip the value of sales in those currencies when translated back into euros on the company’s balance sheet. The yen has fallen 5.2 percent against the euro in 2007, while the dollar has dropped 3.9 percent.

“The group recorded a further increase in its current operating margin to more than 19 percent,” LVMH Chairman Bernard Arnault said in the statement. “These results are even more remarkable given the significant negative impact of exchange rates in the first half of 2007.”

LVMH forecast a “significant rise” in full year results.

This post was written by James Matthews. If you have any questions or comments you may contact him at james@jewelerslounge.com