Louis Vuitton 2003 Annual Report Download - page 92

90 LVMH ANNUAL
REPORT 2003
ACTIVITY REVIEW FOR THE YEAR ENDED DECEMBER 31, 2003
★Consolidated net sales for 2003 tota-
led 11,962 million euros, down 6% on
last year. On a constant currency basis,
net sales rose 4% despite the impact of
the war in Iraq and the SARS epidemic
in Asia, which impacted performances
in the first half of 2003.
★The change in the Group’s scope of
consolidation resulted in a 1 point drop
in net sales. The main changes are as
follows: within Wines and Spirits, the
sale of Hine at the end of June 2003,
then Canard-Duchêne at the end of
September 2003; within Fashion and
Leather Goods, the first-time consoli-
dation of Rossimoda in 2003; within
Perfumes and Cosmetics, the sale of
Hard Candy and Urban Decay in Decem-
ber 2002, as well as the sale of US licen-
ses for Michael Kors, Marc Jacobs and
Kenneth Cole in April 2003; and the
consolidation on a proportional basis of
the De Beers LV joint venture as of
January 1, 2003.
★Net sales for Wines and Spirits were
down 7% on last year. Excluding cur-
rency and consolidation scope impacts,
net sales increased 5%. These figures,
which excluded Millennium as it was
consolidated on an equity basis, reflect
a 1% volume increase in champagne
sales on a comparable consolidation
basis, and a 5% increase for cognac.
Champagne posted double-digit growth
in the UK and Japanese markets, while
cognac posted its highest growth in the
United States and Greater China (Peo-
ple’s Republic of China, Hong Kong and
Taiwan).
★Net sales for Fashion and Leather
Goods dropped by 1%, but posted a 10%
increase on a constant currency basis.
Louis Vuitton recorded double-digit
growth on a constant currency basis
compared to 2002, due in particular to
high growth in the United States: up
38% (excluding Hawaii) and Japan: up
13%.
The other main brands of this group
posted significant growth in net sales in
the second half of 2003 after a first half
slowed down by a depressed worldwide
economy.
★Net sales for Perfumes and Cosmetics
declined by 7%. On a constant currency
and consolidation scope basis, net sales
were up 4%. Highlights for 2003 include
the successful launches of L’Instant
by Guerlain and Very Irresistible by
Givenchy, as well as the continued
growth of the leading lines J’Adore and
Capture by Dior and Flower by Kenzo.
These performances have been achieved
thanks to sustained growth in Japan
and Asia despite a difficult “travel
retail” environment.
★Net sales for Watches and Jewelry
dropped 9% on last year. On a constant
currency basis and taking into account
the decline in the sale of components
to third parties, 2003 net sales were
unchanged from 2002. This activity,
which particularly suffered from the
sluggish European economy, showed
signs of recovery in the fourth quarter
of 2003, with renewed sales growth
compared to the same period in 2002.
★Selective Retailing net sales were
down 9%, but increased 1% on a cons-
tant currency basis. Within this business
group, DFS was particularly affected
during the first half of the year by the
war in Iraq and the effects of the SARS
epidemic on the tourism market in
Asia. However, DFS sales improved
significantly as from September resul-
ting in performances in November and
December 2003 exceeding those posted
in the same period in 2002. Miami Crui-
seline sales were up 13% on last year. In
the United States, Sephora recorded
double-digit sales growth on a compa-
rable store basis. Paris department sto-
res suffered from the economic
slowdown and La Samaritaine conti-
nued to work on the renovation and
repositioning of its flagship store.
★Other Activities include the Media
business group, which posted a 3% drop
in net sales, and the De Beers LV joint
venture. De Beers LV, which was conso-
lidated on a proportional basis in 2003,
is developing its sales in its London
store and its “ shop in shop” in a selec-
tion of Japanese department stores.
★The relative contribution of each
business group to total net sales has
changed little compared to last year:
the percentage of Wines and Spirits and
Perfumes and Cosmetics remained
steady, each representing 18% of total
net sales; Watches and Jewelry also
remained stable with 4% of total net
sales, while Fashion and Leather Goods
increased from 33% to just under 35%
in 2003; Selective Retailing dropped
from 26% to 25% compared to last year.
The breakdown of net sales by invoicing
currency was also largely unchanged:
the Euro zone increased from 32% to
33%, while the US dollar fell by 1 point
to 31%, the yen remained stable at 16%
and the Hong Kong dollar represented
4% of total net sales.
Changes in net sales by geographic
region as a percentage of total net sales
were as follows: France remained stable
at 17%, Asia (excl. Japan) dropped by
2 points to 13% following the SARS epi-
demic, and the United States fell by
1 point to 26%. Europe (excluding
France) and Japan increased by 1 point
to 21% and 16% respectively.
★Gross margin amounted to 7,791
million euros, representing 65% of net
sales, up 1 point from 2002, due princi-
pally to the favorable impact of currency
hedging but also to industrial producti-
vity gains.
★Marketing and selling expenses tota-
led 4,401 million euros, down 6% on
2002. On a constant consolidation
scope and currency basis, these expen-
ses rose 4%, which was partly driven by
the opening of new stores and partly by
sustained investments in advertising
and promotion, particularly for Louis
Vuitton.
★General and administrative expenses
totaled 1,208 million euros, down 15%
on a reported basis and 8% on a com-
parable consolidation scope and