Louis Vuitton 2008 Annual Report Download

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LVMH010_2008_GB:Mise en page 1 24/03/09 11:10 Page 2
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Annual report 2008

Table of contents

  • Page 1
    LVMH PASSIONATE ABOUT CREATIVIT Y Annual report 2008

  • Page 2
    ... famous stars is the face of the perfume J'adore. Born in 1999, J'adore immediately won over women's hearts. It is still adored today and its spectacular success is part of the history of Dior. Charlize Theron, its ambassador, radiant and luminous, appears illuminated with gold. Her gown, created by...

  • Page 3
    ...12 The LVMH Share 14 Review of operations 16 Wines & Spirit s 24 Fashion & Leat her Goods 32 Perf umes & Cosmet ics 40 Wat ches & Jew elry 46 Select ive Ret ailing 52 Sustainable development 54 A prof essional advent ure unique in t he creat ive world 62 Corporat e sponsorship t o support cult ure...

  • Page 4
    ... Message Bernard Arnault Creativity and quality our key values, our priorities Our leading brands have st rong, t im eless values, which carry a t rue m essage of qualit y and a real prom ise of excellence. We will cont inue t o support t hese brands so t hat t hey can, once again, assert t heir...

  • Page 5
    ...our employees. The proactivity of everyone in our Houses and across our markets worldwide has enabled us to respond rapidly to the unstable environment and to limit its consequences. There have been a number of successes this year. I will start with t hose t hat we owe t o our leading brands. Louis...

  • Page 6
    ... largest cust om er b ase f or Louis Vuit t on w o rld w id e. Th e Gro u p ' s m o re recen t m o ves are also very p ro m isin g . Glen m o ran g ie an d Ben ef it h ave b een h u g ely successf ul in Asia, Sephora in East ern Europe, Marc Jacobs in Europe, Hennessy in Viet nam et c. In short...

  • Page 7
    ... Maison in March 2008, Louis Vuitton invited representatives of the world's media to an artistic voyage between its two Maisons. It was an opportunity to offer Hong Kong a marvelous visual feast, celebrating its status as the Asian capital of luxury and high fashion. PASSIONATE ABOUT CREATIVITY 05

  • Page 8
    ... leur profit abilit é, ent raînant une nouvelle progression de la m arge opérat ionnelle courant e du Groupe. 17,193 16,481 15,306 3,172 3,628 3,555 2006 2007 2008 2006 2007 2008 A solid performance in a contrasting economic environment Revenue by business group EUR million Revenue by...

  • Page 9
    ...859 24 % 14% 23% 20 % 10% 2006 2007 2008 Revenue by geographic region of delivery 115 stores in % â- France â- Rest of Europe â- Unit ed St at es â- Japan â- Rest of Asia â- Ot her m arket s 9% Profit from recurring operations by business group EUR million 13,887 12,528 â- Tot al equit...

  • Page 10
    ... y of our products are our best assets to strengthen our posit ions. For exam ple, we are going t o support t he innovat ion and com m unicat ions of our f lagship brands, the emblematic lines that are such a success wit h our cust om ers. New st ores will be t arget ed in t he market s wit h t he...

  • Page 11
    PASSIONATE ABOUT CREATIVITY 09

  • Page 12
    ... 500 shares of L VMH. The Board of Directors met four times in 2008, on a writ t en not ice of meet ing from t he Chairman sent t o each of t he Direct ors at least one week bef ore the date of the meeting. The attendance rate of the members at meet ings averaged 74% . The Board approved t he annual...

  • Page 13
    ... f unds Bernard Rolley Operat ions Pierre-Yves Roussel Fashion Mark Weber Donna Karan, LVMH Inc. (1) Board of Directors Bernard Arnault Chairm an & Chief Execut ive Of f icer Ant oine Bernheim Vice Chairm an Ant onio Belloni Group Managing Direct or Ant oine Arnault Delphine Arnault -Gancia Jean...

  • Page 14
    ... ain classes of invest ors t hen having t o m ake f orced asset sales. Share prices, along wit h consum er an d b u sin ess b eh avio r, w ere h eavily im pact ed. Econom ic act ivit y det eriorat ed t angibly in t he Unit ed St at es, Europe and Japan, and even in t he em erging co u n t ries. In...

  • Page 15
    ... Growt h f or t he year Payout rat io* * as a percent age of Group share of net prof it . - 39% 14.3% 39% 21.7% 36% Breakdown of capital and voting rights as of Decem ber 31, 2008 Echos, Invest ir , Connaissance des Art s % of capit al % of vot ing right s Number of shares Number of vot ing...

  • Page 16
    Review of operations Wines SPIRITS 16 & 24 Fashion Leather Goods Perfumes & 14

  • Page 17
    32 Watches Jewelry 40 46 Retailing PASSIONATE ABOUT CREATIVITY & Cosmetics Selective 15

  • Page 18
    WINES SPIRITS & Exceptional products for 16

  • Page 19
    ... market exceptional products in keeping with a consumption trend with good long-term prospects. T hese brands make our Group the world leader in prestigious wines and spirits. Highlights of 2008 LVMH expanded its portfolio of brands. Early in 2008, Moët Hennessy acquired the Spanish wine company...

  • Page 20
    ...value strategy. In the difficult environment that will dominate 2009, we hold many assets: the prestige of our brands and the way they complement each other in terms of positioning within each market segment; the solid distribution of our activities between established markets and emerging countries...

  • Page 21
    ... growth on the high-end segments of the market. The world leader in champagne, LVMH also holds sparkling and still wines from the world's most famous wine-growing regions. The Group is also the world leader in cognac with Hennessy and, as a means of complementing that historic business, is expanding...

  • Page 22
    WINES SPIRITS 20

  • Page 23
    ... initials for the end of the year celebrations, an offer that was highly successful worldwide. Est at es & Wines, the entity that holds the sparkling and still wines of Moët Hennessy, generated continued organic growth in all regions of the world, with the exception of the United States and Japan...

  • Page 24
    ... positions in the highly competitive Taiwan market and, thanks to in-depth work initiated several years ago, it is achieving outstanding growth in Vietnam. In the United States, its second market, Hennessy, still the category leader, continued its value creation strategy, backed by the advertising...

  • Page 25
    PASSIONATE ABOUT CREATIVITY 23

  • Page 26
    ... of the Damier Graphite line, which expands the brand's product offer in the men's segment. â- Fendi celebrated the 10th anniversary of its Baguette model and opened a flagship store on Avenue Montaigne in Paris. â- Two new designers joined the Group's Houses: Phoebe Philo at Celine...

  • Page 27
    PASSIONATE ABOUT CREATIVITY 25

  • Page 28
    ... form the Fashion and Leather Goods business group. This exceptional set of brands born on both sides of the Atlantic has 1,090 stores worldwide. While respecting the identity and creative positioning of each of the brands, LVMH supports their develop­ ment by providing shared resources. 26

  • Page 29
    ... 20% 25% 7% France Rest of Europe United Stated Japan Rest of Asia Other markets 2006 2007 2008 2006 2007 2008 he market for men is currently booming. In the emerging countries, for example, men are the leading customers for luxury goods. The men's segment is a market in which Louis Vuitton has...

  • Page 30
    ... actively continued to expand its retail network, which totaled 425 stores as of December 31, 2008. New stores were opened in all regions of the world, and at a very steady rate in China and Korea based on the brand's rapid success in those countries. Louis Vuitton established a presence in Finland...

  • Page 31
    ... ready-to-wear and leather goods was one of the main factors driving this growth. A line of Marc by Marc Jacobs fantasy jewelry was launched in 2008. In this rapidly expanding segment, the brand is already taking excellent competitive positions.The new leather products in the Collection line were...

  • Page 32
    .... The brand continued to expand its retail network selectively and launched an online sales boutique. Berluti continued to expand, opening five stores, owned and franchise, which raised its points of sale worldwide to 34 at year end 2008. The creations by Olga Berluti, a new footwear collection...

  • Page 33
    ... a retrospec­ tive organized by a New York gallery, Louis Vuitton and Marc Jacobs pay tribute to Stephen Sprouse by creating a collection inspired by their initial collabora­ tion. The two leather lines in a limited edition carry the motifs which, according to Marc Jacobs, best represent the...

  • Page 34
    32

  • Page 35
    ... Dior, the star brand of the business group, the dynamic performance of all the perfume and cosmetic companies within the division, the vitality of their iconic product lines, and the deployment of exceptional creativity ensure growth in the LVMH market share year after year. Highlights of 2008...

  • Page 36
    ... brands are Benefit Cosmetics and Fresh, two young, highly innovative and high-growth American companies, the prestigious Italian brand Acqua di Parma, Parfums Loewe and Make Up For Ever, a French brand specializing in professional makeup products that has successfully begun to expand its customer...

  • Page 37
    ... become classics in the future. Other markets 14% 16% France Rest of Asia Japan 14% 6% 42% Rest of Europe 8% Skincare products 18% 54% Cosmetics 28% Perfumes United States 2006 2007 2008 2006 2007 2008 2006 2007 2008 Revenue EUR million Profit from recurring operations EUR...

  • Page 38
    ... high­end innovation, it gene­ rated revenue growth in all product categories. The new men's fragrance Guerlain Homme was favorably received, while the House's great clas­ sic Shalimar, supported by a new promotional campaign with Natalia Vodianova, achieved excel­ lent performance. The make...

  • Page 39
    ... a substantial revenue growth and a sharp increase in its profit from recurring operations. These very positive results were driven by brand growth in almost all regions of the world, with particularly satisfactory performances in France, the Middle East, and China. All product lines grew...

  • Page 40
    ... promising new products last year. The international line of its "Brow Bars", a concept born in the United States, is another major asset for Benefit. Make Up For Ever capitalized on its brand identity as a company originally specializing in professio­ nal make­up which is now offering its...

  • Page 41
    ... e segm en t J'ad o re , Po iso n , M iss Dio r , Eau Sau vage , w ill d ep lo y a n u m ber of creative in n ovation s in m ake-u p , p articu larly w it h t h e in t r o d u ct io n o f a n e w fo u n d a t io n Dio rskin Nu d e , an d w ill co n t in u e t o en h an ce its Cap tu re skin care lin...

  • Page 42
    Watches Jewelry Co a s 40

  • Page 43
    ...campaign. â- Montres Dior became a joint-venture between LVMH and Dior Couture. â- Fred successfully relaunched its mythical Force 10 line and renovated its flagship store on the Place Vendôme in Paris. â- LVMH Watches and Jewelry strengthened its control over its distribution in China and India...

  • Page 44
    ... our operating profitability and prepare for the challenges to come. O A st ro n g co m m it m en t fro m o u r t eam s 25 28 39 Revenue by geographic region of delivery in % 8% 28% 19% 12% 16% 17% France Rest of Europe United States Japan Rest of Asia Other markets 2006 2007 2008...

  • Page 45
    ... in its profitability, the Watches and Jewelry business group consolidated the positions it had achieved. The year was characterized by a sluggish American market and by a decline in demand in Japan. All the brands increased their revenue in Europe and Asia and recorded significant growth in the...

  • Page 46
    ... its operations in Korea. The brand recorded steady growth in France and gained market share in Japan. Its jewelry collection Attrape­Moi si tu m'aimes, to which new designs were added, contributed to further sales for high-end jewelry. The emblematic Liens jewelry line from Chaumet was expanded...

  • Page 47
    ... the latest in jewelry, it appeals to both men and women. Fred also renewed its watch line and offered fine sets of jewelry to meet demand from a very exclusive customer base. The flagship store on Place Vendôme was renovated and generated steady growth. A new advertising campaign embodied by Kate...

  • Page 48
    ...world, the teams developing the LVMH Selective Retailing operations are working, each in their own area, to offer consumers a unique shopping experience in terms of product offer and service. Thanks to their talents and efforts, our concepts achieve increasingly solid leadership positions every year...

  • Page 49
    ...store and launched its new Internet site treeslbm.com. Sephora welcomed new exclusive brands and launched its bio-product line Sephora Green Connection. DFS launched a climate change campaign in its stores. Among other actions as part of a human resources development program, Sephora opened in Paris...

  • Page 50
    ...million 387 Profit from recurring operations 426 388 Invest in the best growth opportunities he companies of the Selective Retailing business group continued to affirm their difference and strengthen the added value offered to their customers. Their ability to offer a unique experience is the...

  • Page 51
    ... in 2008; it achieved revenue growth and market share gains in all regions, and maintained its good level of profitability. Revenue growth was driven by growth on a same­store basis and by a number of new stores. In this context of steady investments in order to expand its network, Sephora...

  • Page 52
    ... 2008, Sephora's global network represented 898 stores in 23 countries. Europe had 603 stores, North America 227 (inclu­ ding 215 in the United States and 12 in Canada), Asia had 52 stores, and the Middle East, entered for the first time in 2007, 16 stores. In October Selective 2008, in order...

  • Page 53
    ...end, the store recorded slightly slower activity and main­ tained solid profitability. The second­half launch of the new website treeslbm.com was well recei­ ved. The public's interest in the site was confir­ med by the number of visitors and pages viewed and, since December 2008, by revenue...

  • Page 54
    .... Sustainable development is inseparable from LVMH's strategy. It is therefore presented in the annual report. Social Policy To encourage all our employees to reach their full career potential and achieve their aspirations, develop the diversity and the wealth of human resources in our companies in...

  • Page 55
    ...preserve the resources of the planet, to design and develop products that respect the environment, to report on our policies and projects and the progress achieved in meeting our objectives. To contribute to environmental protection above and beyond the factors directly related to our operations, by...

  • Page 56
    ... Because our future success will come from the renewal of our product offering while respecting the roots of our Houses. Excellence Because we embody what is most noble and accomplished in the artisan world. Brand image enhancement Because they represent an extraordinary asset, a source of...

  • Page 57
    ..., Watches & Jewelry, Selective Retailing and Media), which are well-established on all continents, but also an incredible mosaic of busi­ nesses in which each and every talent can flourish. Working with the design, production design and distribution-sales teams, the management of the Houses' direct...

  • Page 58
    ... enabled multiple jobs to be created in 2008 across the Group's companies and brands: Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, and Selective Retailing. LVMH has 77,087 employees world­ wide, with the average number of employees over the fiscal year up...

  • Page 59
    ... in a dynamic professional environment The development of women and men in high-performance teams around the world is a key objective of the Human Resources policy. The interest of each employee exactly matches the interest of the Group when it comes to ensuring the development of individual talents...

  • Page 60
    ...with the market. In order to maintain this positioning, salary surveys are conducted every year with specific analyses, as needed, on the situation of certain businesses or sectors in local or regional markets. Most of the Group Houses in France pay all their personnel substantial profit-sharing and...

  • Page 61
    ... order to make the process more objective. In order to complete the measures taken by the Human Resources teams, training sessions have been organized to increase executive awareness of these aspects when they are formalizing their recruitment needs and job descriptions. In 2008, the Group initiated...

  • Page 62
    ... are mainly located in France, Spain and Italy, and the majority of its subcontractors are in Europe. However, it seemed crucial that in addition to the codes and charters developed by the companies of the Group for their suppliers, LVMH should guarantee a standard policy extending its values to...

  • Page 63
    ...40 Men 20 33 % 24 % 0 France Rest United States of Europe Japan Rest of Asia Other markets 26 % 23 % 24 % 38 % 40 65 % 20 27 % 0 Wines Fashion & Perfumes & Spirits Leather Goods & Cosmetics Watches & Jewelry Selective Retailing Other activities 18 % 45 % 20 % 43 % Men invested in training â,¬ 57...

  • Page 64
    ..., Takashi Murakami) in the LVMH corpo­ rate headquarters and by our continued support for the French Pavillon at the Venice Biennale. Finally, 2009 will be the year in which construction begins on the magnificent building designed by Frank Gehry for the Louis Vuitton Foundation for Creation in...

  • Page 65
    ... also included conferences, training and the creation of specific tools. For example, Parfums Kenzo has organized theme lunches or discussed the issue during breakfast orientation sessions for new employees. The company has also placed on its Intranet site its sustainable development charter or the...

  • Page 66
    ... by the Houses. All the marketing teams at Moët & Chandon, Dom Pérignon and Ruinart have been trained in eco-design, good commu­ nications practices and the eco-design tool deve­ loped in 2007 by the company. Other companies, like Louis Vuitton, conducted internal communication campaigns based...

  • Page 67
    ... coast of the United States, heating and hot water production using geother­ mal and solar energy, and rain water recovery at the Fiesso factory in Italy. Moët & Chandon opened its new pressing center in Mailly-Champagne, which was designed and is operated using a High Environmental Quality (HQE...

  • Page 68
    ...in general As part of its guiding principle of sharing with the greatest number of people, LVMH continues to conduct programs with the community and the academic world. For example, with Orée, a French association of businesses and local autho­ rities specializing in the environment, the Group has...

  • Page 69
    LVMH CONSOLIDATED FINANCIAL STATEMENTS 2008 The consolidated financial statements presented in the following pages are abbreviated. PASSIONATE ABOUT CREATIVITY 67

  • Page 70
    ...and cash equivalents CURRENT ASSETS TOTAL ASSETS 31,577 30,384 28,371 (1) As of December 31, 2008, the Group's income tax liability with respect to the French tax consolidation structure is presented after offsetting advance tax payments. The balance sheets for the years ended December 31, 2007...

  • Page 71
    ... Group share of net profit Equity - Group share Minority interests TOTAL EQUITY Long term borrowings Provisions Deferred tax Other non-current liabilities NON-CURRENT LIABILITIES Short term borrowings Trade accounts payable Income taxes Provisions Other current liabilities CURRENT LIABILITIES TOTAL...

  • Page 72
    ...billion euros at year-end 2007, mirroring revenue growth. Cash and cash equivalents, excluding current available-forsale financial assets, decreased from 1.6 billion euros as of December 31, 2007 to 1.0 billion euros. The Group share of equity before appropriation of profit increased to 12.9 billion...

  • Page 73
    ... income statement EUR millions, except for earnings per share REVENUE Cost of sales GROSS MARGIN Marketing and selling expenses General and administrative expenses PROFIT FROM RECURRING OPERATIONS Other operating income and expenses OPERATING PROFIT Cost of net financial debt Other financial income...

  • Page 74
    ... by the Group's main brands, this increase is due to the continued development of distribution networks, as much for retail activities (stores) as for wholesale business. Nevertheless, the level of these marketing and selling expenses remained stable as a percentage of revenue, amounting to...

  • Page 75
    ... 44 million euros the previous year. In 2008, this heading included the Group's share in the capital gains realized on the sale of the French video game retailer Micromania and the recognition of impairment losses on current and non-current available for sale financial assets, made necessary by the...

  • Page 76
    ... Repayment of borrowings Purchase and proceeds from sale of current available for sale financial assets NET CASH FROM (USED IN) FINANCING ACTIVITIES 2,254 (2,301) (47) (94) 2,006 (1,700) (278) 28 785 (1,757) (181) (1,153) V. EFFECT OF EXCHANGE RATE CHANGES NET INCREASE (DECREASE) IN CASH AND...

  • Page 77
    ... the year, net of disposals, resulted in net cash outflows of 947 million euros. This amount reflects the Group's growth strategy and that of its flagship brands such as Louis Vuitton, Sephora and Parfums Christian Dior. Disposals of non-current available for sale financial assets, net of purchases...

  • Page 78
    Consolidated statement of changes in equity Number of shares EUR millions Revaluation Share Share Treasury reserves capital premium shares and LVMHaccount share settled derivatives Cumulative translation adjustment Net profit and other reserves Group share Total equity Minority Total interests...

  • Page 79
    ..., Patrick Demarchelier, Jean Chénel, Fondation Louis Vuitton pour la Création / Nicolas Borel, Gaëtan Bernard, DR, photo archives LVMH and Group Companies. Design and production Phénix Communication/Yin Partners 52, avenue des Champs-Elysées - 75008 Paris - France Telephone 33 1 45 62 62 62...

  • Page 80