Louis Vuitton 2005 Annual Report Download

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LVMH
PASSIONATE ABOUT CREATIVITY
ANNUAL REPORT 2005

Table of contents

  • Page 1
    LVMH PASSIONATE ABOUT CREATIVITY A N N U A L R E P O R T 2005

  • Page 2

  • Page 3
    ... FASHION & LEATHER GOODS PERFUMES & COSMETICS WATCHES & JEWELRY SELECTIVE RETAILING SUSTAINABLE DEVELOPMENT A corporate commitment policy A patronage to support culture, youth and humanitarian action LVMH is committed to preserving the environment Consolidated Financial Statements PASSIONATE...

  • Page 4
    LVMH 2005 PASSIONATE ABOUT CREATIVITY PASSIONATE ABOUT CREATIVITY 2

  • Page 5
    ... group of powerfully evocative brands and great names that are synonymous with the history of luxury. A natural alliance between art and craftsmanship where creativity, virtuosity and quality intersect. A remarkable economic success story with near 60,000 employees worldwide and global leadership...

  • Page 6
    LVMH 2005 CHAIRMAN ' S MESSAGE 2005 has once again demonstrated the strength of our star brands which have continued to gain market share, largely due to their proven ability for continual innovation. In addition, the year has illustrated our capacity to gradually bring the brands in which we have...

  • Page 7
    ... EXCEPTIONAL LVMH, the world's leading luxury products group in a growing market, continues to widen its competitive margin. The Group achieved record revenues in 2005, improved operating margin and increased net profit by 21%. The LVMH share price rose by more than 33% over the last year - a strong...

  • Page 8
    ... products, as well as Russia and the most advanced countries of Central and Eastern Europe, where the economies are developing at a fast pace. Innovation, the main engine of our success, will remain a core part of our growth strategy. Louis Vuitton will launch new lines in innovative leather goods...

  • Page 9
    ... brand and the world of art and culture. Among many other experiences, visitors must take the monumental escalator that leads to the top level, allowing them to view the contribution of Tim White-Sobieski. The American video maker has created a luminous work, projected on twelve, specially designed...

  • Page 10
    LVMH 2005 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS NUMBER OF STORES STORE NETWORK AT DECEMBER 31, 2005 France Rest of Europe North America South America Africa and Middle East Asia (excl. Japan) Japan Pacific Region 278 422 377 18 9 329 262 28 1,693 1,723 1,592 REVENUE (EUR million) PROFIT ...

  • Page 11
    ... PROFIT PER SHARE (in euros) REVENUE BY GEOGRAPHIC REGION OF DELIVERY in % 1,668 1,402 1,194 1,440 2.55 3.06 2004 2005 2004 2005 2004 2005 CASH FLOW FROM OPERATIONS (EUR million) CAPITAL EXPENDITURES (1) (EUR million) France Rest of Europe United States Japan Rest of Asia Other markets...

  • Page 12
    ... brands. Louis Vuitton, which has a long history of relations with the Maharajas, who love luxury and are loyal special-order customers, owns stores in New Delhi and Mumbai, and plans to open a store in Bangalore. TAG Heuer and Montres Dior are already present in India at prestigious sales points...

  • Page 13
    LVMH 2005 HIGHLIGHTS 1 2 1. To construct the extraordinary ribbon of gold that welcomes visitors to the mezzanine in the new Maison Guerlain des Champs-Élysées, 350,000 mosaic marble tiles decorated with fine gold were cut and assembled. 2. Fendi, 2005 spring-summer collection. PASSIONATE ...

  • Page 14
    ...to the Company. Members of the Board of Directors must personally own at least 500 shares of LVMH. The Board of Directors met four times in 2005, with an average attendance rate of 82%. The Board approved the annual and interim financial statements and reviewed the Group's major strategic guidelines...

  • Page 15
    ... MANAGEMENT BOARD OF DIRECTORS Bernard Arnault Chairman & Chief Executive Officer EXECUTIVE COMMITTEE Bernard Arnault Chairman & Chief Executive Officer Antonio Belloni Group Managing Director Nicolas Bazire Development & Acquisitions Ed Brennan Travel retail Yves Carcelle Fashion & Leather Goods...

  • Page 16
    ... code: LVMH.PA; Bloomberg code: MC FP; ISIN code: FR0000121014). In addition, negotiable options on LVMH shares are traded on the Monep market in Paris. LVMH is one of the French companies recognized by the three main socially responsible investment indexes (American, French and European). TOTAL...

  • Page 17
    LVMH 2005 THE LVMH SHARE CAPITAL STRUCTURE (Euroclear France survey on bearer shares as at December 31, 2005) Groupe Arnault Treasury stock French institutional investors Foreign institutional investors including: United States United Kingdom Germany Switzerland 5.5% 4.0% 3.5% 3.2% 47.5% 3.9% 17...

  • Page 18
    LVMH 2005 REVIEW OF OPERATIONS WINES AND SPIRITS 18 FASHION AND LEATHER GOODS 26 PERFUMES AND PASSIONATE ABOUT CREATIVITY 16

  • Page 19
    COSMETICS 34 WATCHES AND JEWELRY 42 SELECTIVE RETAILING 48 PASSIONATE ABOUT CREATIVITY 17

  • Page 20
    LVMH 2005 WINES AND SPIRITS WINES & SPIRITS Global ambassadors of luxury, the wine and spirit brands within LVMH market exceptional products sought after by customers that love quality. These brands make our Group the world... international press. The guests had the privilege of tasting the Grands ...

  • Page 21
    LVMH 2005 WINES AND SPIRITS Highlights The Wines and Spirits business group recorded organic revenue growth of 11%, and profit from recurring operations increased by 7%, despite a climate of unfavorable exchange rates. Revenue of all Champagne and Wines posted organic growth of 10%. Hennessy ...

  • Page 22
    ... of Europe United States Japan Rest of Asia Other markets 9% 27% 33% 9% 13% 9% 869 813 SALES VOLUMES millions of bottles Christophe Navarre President of the Wines and Spirits business group Our business group will continue its value strategy in order to strengthen its leadership in the high-end...

  • Page 23
    ... by the good performances of the brands and by the efficiency of Moët Hennessy's powerful global distribution network. The 4% growth in sales volumes of champagne was accompanied by price increases in all key markets and the continued strategy of improving the product mix. The growth of Hennessy...

  • Page 24
    ... Europe and Latin America. distribution network Krug once again had an excellent year, confirming the success of its repositioning and its ability to appeal to a public that is more open than it used to be. By concentrating its investments in its strategic markets, i.e. the United States, Japan...

  • Page 25
    LVMH 2005 WINES AND SPIRITS PASSIONATE ABOUT CREATIVITY 23

  • Page 26
    ... 2005 WINES AND SPIRITS Limited Edition The fineness of bubbles, the lightness of champagne and the purity of crystal. To adorn "Crystallised Moët", the great Champagne house partnered with Swarovski to transport us to a glamorous sparkling world which lights up those festive moments. PASSIONATE...

  • Page 27
    ... to train staff, major publicity and promotional investments and a policy of sustained prices. An emphasis on innovation and brand image reinforcement will be maintained in strategic markets. The portfolio of brands, distributed by teams with proven expertise, will strengthen LVMH's leading position...

  • Page 28
    ... & LEATHER GOODS LVMH holds a group of brands that is unique in the fashion and leather goods sector, spearheaded by Louis Vuitton, by far the world's leading luxury brand. Louis Vuitton opens its "Maison" Paris, October 12, 2005: after a spectacular inauguration, Louis Vuitton opens its new...

  • Page 29
    LVMH 2005 FASHION AND LEATHER GOODS Highlights In 2005, the Fashion and Leather Goods group recorded organic revenue growth of 12% and an increase of 12% in its profit from recurring operations. It continued to gain market share. For Louis Vuitton, 2005 was a year of savoir-faire and innovation. ...

  • Page 30
    ... of Europe United States Japan Rest of Asia Other markets 9% 17% 22% 30% 18% 4% 1,467 1,309 Yves Carcelle President of the Fashion and Leather Goods business group 2005 was an excellent year for Louis Vuitton, which continued to strengthen its leadership position and extend its global image. As...

  • Page 31
    .... In the fall of 2005, Louis Vuitton launched a new version of its Internet site. Based on the success of its exclusive online boutique on Eluxury.com in the United States, the brand is now offering French consumers the opportunity to buy leather goods, watches and accessories online from its own...

  • Page 32
    ...is more productive while creating greater value for its image. In 2005, Donna Karan improved its profit from recurring operations, confirming the relevance of its new strategy and the quality of the organizational work initiated by its teams since it joined the LVMH group. Celine expanded its retail...

  • Page 33
    LVMH 2005 FASHION AND LEATHER GOODS PASSIONATE ABOUT CREATIVITY 31

  • Page 34
    LVMH 2005 FASHION AND LEATHER GOODS Monogram in confetti to illuminate summer 2006 With patterned perforations and colored lining, Marc Jacobs has reinterpreted the Monogram fabric for the summer of 2006. The new Monogram Perforé line picks up the vibrant colors of the ready-to-wear collection. ...

  • Page 35
    ... expansion, again recording strong revenue growth. An icon in the United States, the brand also expanded in Japan and Asia and is preparing to enter Europe in 2006. Pucci had an excellent year highlighted by the development of its retail network and the arrival of the talented new designer, Matthew...

  • Page 36
    LVMH 2005 PERFUMES AND COSMETICS PERFUMES & CO S A culture of excellence, successful innovations, an ability to move our best-sellers into the ranks of the great classics-thanks to this combination of factors, our brands have demonstrated exceptional vitality within the selective worlds of perfume...

  • Page 37
    ... star brands gained market share by focusing on their very high-end positioning. In the United States, the selective redeployment of distribution continued with positive results, an indicator of future qualitative growth. The young cosmetics companies, currently in the development phase, maintained...

  • Page 38
    ... new products that incarnate the nobility of great perfume creation. In the high-growth makeup and skin care segments, our French brands and young cosmetics companies owe their success to the continuous nurturing of creativity and to the expertise of the LVMH research and development teams working...

  • Page 39
    ... Parfums Loewe, developed for the Spanish fashion and leather goods company, and Make Up For Ever, a French brand specializing in professional makeup products, which has successfully started to expand its original customer base. GROWTH THAT OUTPACED THE MARKET AND STEADY GAINS IN PROFITABILITY In an...

  • Page 40
    ...as it is in the anti-aging market with its Capture line. Parfums Christian Dior again increased profitability in 2005, while increasing promotional expenditures and intensifying efforts to enhance the quality of its presence at points of sale. GUERLAIN CONFIRMS ITS NEW MOMENTUM Guerlain turned in an...

  • Page 41
    LVMH 2005 PERFUMES AND COSMETICS KissKiss from Guerlain: Prize for excellence and an object of desire Its precious colors, its underlying texture, its delicate scent with violet and red fruits, its jeweled case and pure sculptured lines as if modeled by a handprint, earned it the 2006 Prix D'...

  • Page 42
    MISS DIOR CHÉRIE www.dior.com Tout le charme de Dior dans un parfum.

  • Page 43
    ...a good year in 2005 with a strong improvement in its profitability. Acqua di Parma and the young American brands BeneFit Cosmetics and Fresh maintained their double-digit growth. BeneFit Cosmetics recorded one of the most dynamic performances in its market segment in the United States and the United...

  • Page 44
    ... the event in the largest shopping center in Shanghai. In 2005, TAG Heuer, as well as the Dior and Zenith watches launched their sales offensive in China, a rapidly expanding market that is becoming a strong growth driver. TAG Heuer creates the event in Shanghai PASSIONATE ABOUT CREATIVITY 42

  • Page 45
    ..., TAG Heuer continued to grow and strengthen its competitive positions. Manufacture Zenith expanded its business in the high-end watch segment and enjoyed a robust increase in revenue. Chaumet, the jeweler, continued to post steady growth for both jewelry and watchmaking in its target countries...

  • Page 46
    ... new, highpotential regions. New product launches planned in 2006 and the continued improvement of margins in a context of strong markets will allow our business group to maintain the strategic course of significant and profitable growth. France Rest of Europe United States Japan Rest of Asia Other...

  • Page 47
    ...LVMH to gain market share in both the watch and jewelry segments. The American continent, Asia and Japan were the strongest growth zones in 2005. New distribution agreements were signed in China for TAG Heuer, Zenith and Dior, accelerating their development. Improved margins, cost control and growth...

  • Page 48
    ...productivity. After Osaka at the end of 2004, Taipei was the site of a new store opened in 2005. the first "high-fashion" chronograph Star Tourbillon from Zenith: The iconic lines Class One and Liens, both now available in watches and jewelry, were revitalized with original and accessible designs...

  • Page 49
    LVMH 2005 WATCHES AND JEWELRY The Chrono Dandy from Chaumet -masculine elegance: When the famous jeweler in Place Vendôme defines masculine elegance, it .... The Dandy style is now available and Chaumet is preparing some complex mechanisms for it expected in 2006. PASSIONATE ABOUT CREATIVITY 47

  • Page 50
    ...segment to operate successfully on three continents. The online sales site sephora.fr was launched in June 2005. Le Bon Marché completed the extensive renovation work in its women's fashion section, a major step in the transformation of the department store that began fifteen years ago. PASSIONATE...

  • Page 51
    ... of this innovative approach is reflected in five consecutive years of double-digit growth in revenue. Across the Atlantic, Sephora is attracting young, demanding customers who are looking for creative, trendy brands and beauty products with high added value. PASSIONATE ABOUT CREATIVITY 49 States.

  • Page 52
    ... market segments, our teams are working to become the best partners to the luxury brands that they promote and sell throughout the world. NUMBER OF STORES 2004 2005 INVESTMENTS EUR million By cultivating their distinctive features, our businesses continue to make progress and add new customers...

  • Page 53
    ...an historic year, gaining market share and exceeding its revenue and earnings targets both in Europe and the United States. The cash flow generated in each of these regions will finance business expansion in Asia. As of December 31, 2005, Sephora had a global network of 558 stores. Sephora continued...

  • Page 54
    ... customers who shop at its stores. In 2005, Sephora continued the successful development of its own brand, which offers high-quality products at attractive prices and, as a result, gained new market segments. As required for quality of service and assistance, in all countries where it does business...

  • Page 55
    ... Delhomme. Fifteen years of new sections, advertizing, cultural exhibits, contemporary art, friendship with the designers, exposure to the world and backstage passions. This adventure is far from over and Le Bon Marché will continue to surprise us. great store on the Left Bank remembers © Jean...

  • Page 56
    ... values. To provide active support for major causes, fund humanitarian projects and public health challenges, and develop initiatives for young people. Environment To work together to preserve the resources of the planet, to design and develop products that respect the environment, to report...

  • Page 57
    LVMH 2005 SUSTAINABLE DEVELOPMENT The values of LVMH Innovation and creativity. Because our trades, so akin to art, are creative, because technological innovation plays an essential role in their timelessness. Excellence. Because the best elements of luxury embodies craftsmanship, and because we ...

  • Page 58
    ... develop talent and to inform the target audiences of the richness of each of their businesses. CUSTOMIZED TRAINING The companies of the Group offer a broad range of training programs to allow employees to develop their professional expertise and their know-how as artisans and designers and to share...

  • Page 59
    ... of transversal group projects and inter-company operational networks. The goal is to make LVMH a true "learning organization" within which each employee can develop him/herself individually and professionally. â- Every year, Louis Vuitton launches nearly 250 new leather products. This steady...

  • Page 60
    ... than market average levels. In order to foster the loyalty of its best employees, LVMH pursued its stock-option program in 2005. "The Art of Luxury Branding" forum offers the participants a new look at the creation, development, and protection of the identity of a luxury brand. PASSIONATE ABOUT...

  • Page 61
    ...within local communities, thereby supporting the long-term growth of the Louis Vuitton brand. Thanks to the steady growth of our brands, a large number of sales jobs are created in all the countries in which we operate, particularly with the expansion of our own stores network. The opening of Maison...

  • Page 62
    ... which executives from the Louis Vuitton, Tag Heuer and Donna Karan companies presented their approaches. Additional information is available in the 2005 LVMH reference document. The International Festival of Fashion and Photography in Hyères, held every year in the South of France, gives young...

  • Page 63
    ...29% 71% France Europe (ex France) North America Latin America Asia Pacific Japan TOTAL OTHER INDICATORS Promotions 1,223 employees were promoted to management positions last year, while 811 labor and production workers and employees were promoted to technical or supervisory jobs. Training 72...

  • Page 64
    ... among others) the opportunity to perform at the level of their talent from year to year. A COMMITMENT TO COMMUNITY LVMH demonstrates active solidarity with the great humanitarian and public health causes in France and worldwide. Our Group supports a number of institutions that work for children, in...

  • Page 65
    ...the Group. New companies are beginning the process, like Moët & Chandon and the Louis Vuitton warehouses in Cergy, which launched the procedure in September 2005. For Moët & Chandon, with a team that has been dedicated to the environment for more than ten years, this new challenge is a way to make...

  • Page 66
    ... AND THE ENVIRONMENT Perfumes, watches, leather goods, champagne...The products of the LVMH group of companies are the incarnation of French luxury and the things that people dream about. LVMH wants these products, which are mythical to customers worldwide, to be developed and sold with care for...

  • Page 67
    ... it to life, while continuing to cooperate closely with the Group's management. Exchanges of information and experience take place on the Intranet and every quarter through the LVMH Environmental Commission, composed of the environmental managers from each company. management team A NEW PROJECT TO...

  • Page 68
    ..." products, and Krug is testing a new method for working barrels by placing them horizontally. FIGHTING TO SAVE ENERGY...With 1,723 stores throughout the world, LVMH must offer increasingly attractive and bright displays for its customers, while it reduces electricity use. Various experiments have...

  • Page 69
    LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS THE CONSOLIDATED FINANCIAL STATEMENTS PRESENTED IN THE FOLLOWING PAGES ARE ABBREVIATED PASSIONATE ABOUT CREATIVITY 67

  • Page 70
    ...for sale financial assets Other non-current assets Deferred tax NON-CURRENT ASSETS 2005 8,530 4,479 4,983 128 451 660 306 19,537 2004 (1) 7,838 4,048 4,541 115 718 628 217 18,105 Inventories and work in progress Trade accounts receivable Income taxes Other current assets Cash and cash equivalents...

  • Page 71
    LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS LIABILITIES AND EQUITY (EUR millions) Share capital Share premium account LVMH treasury shares Revaluation reserves Other reserves Cumulative translation adjustment Group share of net profit Equity - Group share Minority interests TOTAL EQUITY 2005 147 ...

  • Page 72
    ...to net cash generated during the year. The Group share of equity before appropriation of profit increased significantly to 9.5 billion euros, compared to 7.8 billion euros at year-end 2004, thanks to the level of the Group share of net profit generated, which rose by 21%, and the positive change in...

  • Page 73
    ... INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005 (EUR millions, except for earnings per share) REVENUE 2005 13,910 2004 (1) 12,481 Cost of sales GROSS MARGIN (5,001) 8,909 (4,373) 8,108 Marketing and selling expenses General and administrative expenses PROFIT FROM RECURRING OPERATIONS...

  • Page 74
    ... Japan) increased by 2 points to 17% and the United States, Europe, and other markets remained stable at 27%, 20%, and 7%, respectively. The relative contribution of each business group to total revenue was largely unchanged: Fashion and Leather Goods, Selective Retailing, and Watches and Jewelry...

  • Page 75
    ... in profit. Profit from recurring operations for Watches and Jewelry rose sharply from 7 million euros in 2004 to 38 million euros in 2005. Sales growth at TAG Heuer made a significant contribution to this business group's profit increase, while Chaumet and Zenith improved their results in line with...

  • Page 76
    LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED CASH-FLOW STATEMENT (EUR millions) I. OPERATING ACTIVITIES 2005 2,522 639 (102) 47 (17) 3,089 2004 (1) 2,173 529 (25) 20 11 2,708 Operating profit Net increase in depreciation, amortization and provisions, excluding tax and financial ...

  • Page 77
    ...income tax charge on French companies which was paid at the end of 2005. Working capital requirements rose by 257 million euros. In particular, increases in inventories absorbed 281 million euros of cash as a result of business growth and the replenishment of related inventories. The change in trade...

  • Page 78
    LVMH 2005 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total equity Number of shares Share LVMH Share premium treasury capital account shares 147 1,736 (882) (EUR millions) Revaluation reserves 460 Net profit and other reserves 5,761 Cumulative translation ...

  • Page 79
    ... 22 avenue Montaigne - 75008 Paris Telephone 33 1 44 13 22 22 - Fax 33 1 44 13 21 19 www.lvmh.com Photographs Cover photo: Gis...é, Etienne Tordoir, RMN, Leif Carlsson, DR, photo archives LVMH and Group companies. Design and production 41, rue Camille Pelletan - 92300 Levallois-Perret Telephone 33 ...

  • Page 80
    Charlize Theron. Dior www.dior.com