Louis Vuitton 2003 Annual Report Download - page 93

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currency basis. These expenses repre-
sent 10% of sales, down 1 point on
2002.
★Group income from operations jum-
ped 9% to 2,182 million euros. This
upsurge is partly due to the rigorous
control of all costs, which decreased by
over 8%, 2 points higher than the drop
in net sales. Income from operations
over net sales rose by 18%, up 2 points
on 2002.
Income from Wines and Spirits opera-
tions climbed 6% to 796 million euros.
A firm sales pricing policy and gains
from foreign currency hedging limited
the negative impact of exchange rate
fluctuations.
Income from Fashion and Leather
Goods operations increased 2% to 1,311
million euros, despite the sluggish glo-
bal economy. In addition to the rise in
Louis Vuitton earnings, the business
group benefited from a sharp increase
in the earnings of Marc Jacobs, Céline
and the luxury goods Internet site
e-Luxury.com.
Perfumes and Cosmetics posted income
from operations of 178 million euros,
up 11% on 2002. This significant up-
swing was due to a combination of the
sustained performances of Parfums
Christian Dior, improved earnings of
Guerlain and BeneFit Cosmetics and
the reduced impact of the losses of US
licenses.
Watches and Jewelry posted a loss from
operations of 48 million euros, down 35
million euros on 2002. These results are
due to the highly unfavorable economic
context in the first half of 2003, as the
turnaround in the fourth quarter of
2003 only marginally offset the losses of
the first half of the year. A significant
share of these losses was posted by Ebel,
the sale of which was decided at the
year-end.
Income from Selective Retailing opera-
tions climbed sharply from 20 million
euros in 2002 to 106 million euros in
2003. DFS generated income from ope-
rations in 2003 despite the negative
impacts of the drop in global tourism
observed mid-year. Furthermore,
Sephora posted a sharp rise in earnings,
particularly in the United States, while
the earnings of Miami Cruiseline increa-
sed more than two-fold.
★2003 operating losses from Other
Activities amounted to 161 million
euros, down 15% on 2002. In addition
to the headquarter costs, this heading
also includes the losses of the Media
business group, which posted a slight
increase in activity at the year-end. The
joint venture with De Beers, also inclu-
ded under this heading, is currently in
the investment, marketing and com-
mercial phases.
★Financial expenses declined from 294
million euros in 2002 to 233 million
euros in 2003 due to a combined drop
in the Group’s average net debt and
interest rates.
★Other income and expenses inclu-
ded, in particular, the following items:
losses from the disposal of activities
totaling 139 million euros, which
mainly concern Ebel, accelerated asset
depreciation totaling 77 million euros,
regarding, in particular, capitalized
lease commitments exceeding their
market value, an additional 33 million
euro depreciation of the equity stake
in Bouygues, income of 55 million
euros from the release of provisions
and the disposal of LVMH treasury sha-
res, and finally, restructuring charges
of 127 million euros. These restructu-
ring charges concern the rationaliza-
tion of the Wines and Spirits retailing
networks in Europe and the United
States; the increased selectivity of the
Perfumes and Cosmetics points of sale,
particularly in the United States; the
closure or re-sizing of the industrial
units in Italy and Switzerland by the
Watches and Jewelry business group,
and finally the transfer from San Fran-
cisco to Singapore and Hong Kong of
DFS’s administration and management
functions.
★The average corporate tax rate for
2003 was 30%, up slightly on the pre-
vious year’s rate following the inclusion
in 2002 of losses generated by the nega-
tive effects of the unfavorable economic
environment on certain businesses.
★The Group income from investments
accounted for using the equity method
totaled 1 million euros, and represents
LVMH’s share of the earnings of Millen-
nium, Bonhams and DFS joint ventures.
★Net income before amortization of
goodwill and unusual items stood at
1,023 million euros, up 25% on 2002.
★Amortization of goodwill totaled 300
million euros, against 262 million euros
from last year. This increase was due to
changes in the Group’s consolidation
scope, notably the acquisition of Millen-
nium in July 2002, the acquisition of
minority interests in Fendi in the
second half of 2002 and in 2003, the
acquisition of an additional stake in
Acqua Di Parma, the first-time consoli-
dation of Rossimoda, as well as the
accelerated depreciation of Laflachère
and Make Up For Ever.
★Minority interests totaled 108 million
euros compared to 131 million euros in
2002, which is chiefly due to the rise in
Wines and Spirits earnings, in which
Diageo holds a 34% stake, and the posi-
tive impact of the DFS recent common
stock issuance.
★Net income totaled 723 million
euros, up 30% on last year.
91
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