Louis Vuitton 2003 Annual Report Download - page 66

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64 LVMH ANNUAL
REPORT 2003
DFS
Sales by DFS in 2003 were down from the pre-
vious year. After a robust start to the year, tou-
rist numbers were affected by the war in Iraq
and especially by the SARS epidemic, which
interrupted travel to Asia in the second quarter.
Despite a turnaround during the year, business
in 2003 remained slow compared with previous
years.
A STREAMLINED STRUCTURE, GOOD
DRIVERS OF GROWTH
In this context, DFS stepped up efforts to
improve productivity and cut structural costs.
The most substantial savings were made on over-
head costs and thanks to renegotiated conces-
sion costs to adjust them to lower passenger
flows. By absorbing the negative impact of a
decline in sales, these efforts allowed the com-
pany to post a profit, as it did in 2002.
In January 2003, DFS opened a new Galleria in
Singapore. Both stores recently opened at the
Okinawa airport in Japan were expanded.
In 2004, DFS should benefit from the recovery
in the travel business, a trend that is still fragile
given the uncertain geopolitical climate. Its top
priority is to return to a growth trend in sales in
its major stores in Hawaii, Hong Kong, Singapore
and Guam.
At the same time, future development will bene-
fit from two new major opportunities --the ope-
ning of a new Galleria in Okinawa in 2005, and
the increase in the number of travelers from the
People’s Republic of China, who will become the
largest passenger flows in the coming years. Cer-
tain DFS functions have just been transferred at
the right time to Singapore and Hong Kong, to
bring them closer to the company’s most pro-
mising markets.
MI AMI CRUI SELINE
Taking advantage of the growing cruise ship mar-
ket, Miami Cruiseline posted significant growth
in sales, income from operations and cash flow.
Several other factors helped to account for this
performance, including improved logistics, cost-
cutting, and increased visibility on ships.
In 2004, with the introduction of more efficient
inventory management and merchandising,
Miami Cruiseline will continue to improve its per-
formance.
SEPHORA
Sephora had an excellent year in 2003, achie-
ving all its objectives despite the global econo-
mic downturn. While the performance and
profitability of Sephora Europe continued to
improve, the company’s US operations reported
positive income from operations and cash flow
for the first time. Confirming the relevance of
its controlled growth strategy, the company is
now able to finance its expansion.
At December 31, 2003, Sephora had a global
network of 500 stores. A total of fourteen sto-
res were opened in Europe and eight in the Uni-
ted States during the year in the cities and
countries where Sephora has the best prospects
for profitable growth.
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