Louis Vuitton 2009 Annual Report Download - page 78

Comments on the consolidated income statement
Consolidated revenue for the year ended December 31, 2009 was
17,053 million euros, down nearly 1% from the previous year. It was
favorably impacted by the appreciation of the main invoicing currencies
against the euro (average 2009 exchange rates), in particular the US
dollar, which appreciated by 5%. On a constant currency basis, reve-
nue for the year fell by 3%.
Since January 1, 2008, the following changes were made in the
Group’s scope of consolidation: in Wines and Spirits, a 50% stake
was acquired in Château Cheval Blanc (consolidated on a proportional
basis for the first time in August 2009); in Watches and Jewelry, the
Hublot brand was consolidated for the first time in the second half of
2008; in Other activities, the Dutch yacht builder Royal Van Lent was
consolidated for the first time in the fourth quarter of 2008. These
changes in the scope of consolidation contributed 0.4 points to reve-
nue growth for the year.
On a constant consolidation and currency basis, revenue declined
by 4%.
The breakdown of revenue by invoicing currency changed as follows:
the contribution of the euro fell by 2 points to 30%, that of the US
dollar dropped by 1 point to 27%, yen-denominated revenue remained
stable at 10%, while the contribution of all other currencies rose by
3 points to 33%.
By geographic region of delivery, the year saw a drop in the relative
contribution of Europe (excluding France), from 24% to 21%. France,
the United States, Japan and other markets remained stable at 14%,
23%, 10% and 9%, respectively, while Asia (excluding Japan) advanced
by 3 points to 23%.
By business group, the breakdown of Group revenue changed slightly.
The contribution of Wines and Spirits fell by 2 points to 16%, while
the contribution of Perfumes and Cosmetics as well as that of Watches
and Jewelry both fell by 1 point, to 16% and 4%, respectively. The
contribution of Fashion and Leather Goods as well as that of Selective
Retailing both rose by 2 points, to 37% and 27%, respectively.
Wines and Spirits saw a decline in revenue of 12% based on published
figures. On a constant consolidation scope and currency basis, reve-
nue decreased by 14%, with the favorable impact of exchange rate
fluctuations increasing revenue by nearly 2 points. The economic
crisis and substantial destocking at retailers weighed heavily on reve-
nue in the United States, Japan and Europe. Demand remained more
robust in the Asian markets, especially in Vietnam. China is still the
second largest market for the Wines and Spirits business group.
Fashion and Leather Goods posted organic growth in revenue of 2%,
and 5% based on published figures. Louis Vuitton turned in a remar-
kable performance for the year, again recording double-digit revenue
growth based on published figures. The brand has made spectacular
headway in Asia (especially in China), and continues to benefit from
strong momentum in Europe. Fendi and Marc Jacobs also confirmed
their potential, showing a good level of resilience to the economic
slowdown in Europe and reporting strong revenue increases in Asia.
Perfumes and Cosmetics saw a decline in revenue of 4% based on
published figures. On a constant consolidation scope and currency
basis, revenue decreased by 5%, with the favorable impact of
exchange rate fluctuations increasing revenue by nearly 1 point. All
of this business group’s brands reinforced their rigorous management
control, meticulously targeting their investments so as to limit the
impact of the economic crisis. Despite the difficult economic environ-
ment, the Perfumes and Cosmetics business group reported revenue
increases across Asia and especially in China.
On a constant consolidation scope and currency basis, Watches and
Jewelry saw a decline in revenue of 19%, and 13% based on publi-
shed figures (a 3-point positive impact of exchange rate fluctuations
and a 3-point positive impact due to changes in the scope of conso-
lidation). This business group’s performance in all regions was affected
by the economic crisis, particularly in its traditional markets, including
the United States and Japan.
Selective Retailing posted organic revenue growth of 1%, and 4%
based on published figures. This growth was driven by Sephora,
whose sales increased strongly due to the expansion of its retail
network in Europe, North America, and Asia, particularly in China.
Despite weaker performance in tourist regions popular with Japanese
travelers, DFS was able to record revenue growth based on published
figures thanks to the strong rise in business generated with customers
from other parts of Asia, and especially Chinese tourists.
The Group posted a gross margin of 10,889 million euros, down 3%
compared to the previous year. The gross margin on revenue was
64%, 1 point lower than in 2008.
This decrease was kept in check thanks to measures taken to control
the cost of products sold, higher selling prices, efforts to move brands
upmarket resulting in product mix improvements, and the effectiveness
of currency hedges.
Marketing and selling expenses totaled 6,051 million euros, remaining
stable based on published figures and representing a 3% decrease
at constant exchange rates. This decrease resulted mainly from the
supervision and control of communications expenditures by the
Group’s main brands, partially offset by costs related to the continued
development of retail networks. Nevertheless, the level of these marke-
ting and selling expenses remained stable as a percentage of revenue,
amounting to 35%.
General and administrative expenses totaled 1,486 million euros, up
3% based on published figures, and up 1% on a constant currency
basis. They represented 9% of revenue, thus increasing by 1 point
compared to 2008.
The Group’s profit from recurring operations was 3,352 million euros,
8% lower than in 2008. Operating margin as a percentage of conso-
lidated revenue amounted to nearly 20%, 1 point lower than its level
a year earlier.
Exchange rate fluctuations had a negative net impact on the Group’s
profit from recurring operations of 2 million euros compared with the
previous year. This total comprises the following three items: the impact
of changes in exchange rate parities on export and import sales and
purchases by Group companies, the change in the net impact of the
Group’s policy of hedging its commercial exposure to various curren-
cies, and the impact of exchange rate fluctuations on the consolidation
of profit from recurring operations of subsidiaries outside the euro
zone. On a constant currency basis excluding changes in the net
impact of currency hedges, the Group’s profit from recurring operations
would still have decreased by 8%.
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