Louis Vuitton 2008 Annual Report Download - page 74

LVMH010_2008_GB:Mise en page 1 24/03/09 11:14 Page 75
Comments on the consolidated income statement
Consolidated revenue for the year ended December 31, 2008
was 17,193 million euros, up 4% from the previous year. It
was affected by the depreciation of the main invoicing curren-
cies against the euro, in particular the US dollar, which fell by
7%. On a constant currency basis, revenue for the year increa-
sed by 8%.
Since January 1, 2007, the following changes were made in
the Group’s scope of consolidation: in Wines and Spirits, the
stake in the Chinese distiller Wen Jun Spirits, acquired in May
2007, was consolidated for the first time in the second half of
2007; in Watches and Jewelry, the Swiss watchmaker Hublot
was consolidated for the first time in the second half of 2008
and the Italian penmaker Omas was sold and deconsolidated
in the second half of 2007; in Other activities, the media group
Les Echos was consolidated for the first time in the first half of
2008, the business of the financial daily La Tribune, which
was sold in early 2008, was deconsolidated, and 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 1 point to revenue growth
for the year.
At constant structure and exchange rates, organic revenue
growth was 7%.
The breakdown of revenue by invoicing currency changed as
follows: the contribution of the euro increased by 1 point to
32%, that of the US dollar dropped by 2 points to 28%, yen-
denominated revenue fell by 1 point to 10%, while the contri-
bution of all other currencies rose by 2 points to 30%.
By geographic region of delivery, the year saw a drop in the
relative contribution of both the United States and Japan to
Group revenue, falling from 25% to 23% and 11% to 10%,
respectively
. France remained stable at 14% whereas Europe
(excluding France), Asia (excluding Japan) and other markets
(principally the Middle East) each advanced by 1 point, respec-
tively to 24%, 20% and 9%.
The decline in the contribution of the US dollar and the
United States to Group revenue is mainly attributable to the
adverse impact of the appreciation of the euro against the US
dollar. At constant exchange rates, US dollar-denominated
revenue increased by 5% and revenue generated in the United
States increased by 2%.
It is worth noting the exceptionally robust performance of new
regions such as China, Russia and the Middle East, resulting
in considerable increases in invoicing for the corresponding
currencies.
By business group, the breakdown of Group revenue remai-
ned nearly stable. The contribution of Wines and Spirits fell by
2 points to 18%, while that of Fashion and Leather Goods
rose by 1 point to 35%. The contribution of all other business
groups remained unchanged, with Perfumes and Cosmetics at
17%, Selective Retailing at 25%, and Watches and Jewelry at
5%. In Other activities and eliminations, the increase in reve-
nue for the Media division resulting from the acquisition of
the media group Les Echos was partially offset by an increase
in consolidation eliminations arising from the strong revenue
performance achieved by the brands of the Perfumes and
Cosmetics business group to Sephora.
Wines and Spirits saw a decline in revenue of 3% based on
published figures. With the adverse impact of exchange rate
fluctuations decreasing revenue by 4 points, organic growth
was 1%. Although the start of the year was affected by a reduc-
tion in the levels of wholesale inventories, mainly in the United
States and Japan, sales held up well despite the difficult econo-
mic climate. In value terms, organic growth was primarily gene-
rated by higher prices, although champagne and cognac sales
volumes were down by 7% and 6%, respectively. This business
group’s performance varied by market. Demand was less robust
in United States and in Japan due to the economic environ-
ment, thus contrasting with a generally positive trend in
Europe, while expectations were exceeded in China, and in
some other Asian markets such as Vietnam, as well as in Russia
and the Middle East. In 2008, China became the second largest
market for the Wines and Spirits business group.
Fashion and Leather Goods posted organic growth of 10%,
and 7% based on published figures. Louis Vuitton turned in
a remarkable performance for the year, again recording double-
digit organic revenue growth. This brand has made specta cular
headway in Asia, especially China, and continues to benefit
from strong momentum in Europe. Fendi, Donna Karan and
Marc Jacobs also confirmed their potential, with strong
increases in revenue.
Perfumes and Cosmetics posted organic revenue growth of 8%,
and 5% based on published figures. This performance was
spurred by both innovation and the enrichment of existing
lines. All three categories of products—perfume, make-up and
skincare—enjoyed positive growth. Virtually all of the brands
in the portfolio contributed to this performance, from flags-
hip brands such as Parfums Christian Dior or Guerlain to alter-
native and niche brands such as BeneFit Cosmetics and Make
Up For Ever. The Perfumes and Cosmetics business group reaf-
firmed its leadership position in Europe and its brands conti-
nued their steady advances in Russia, China and the Middle
East, markets that confirmed their potential for further growth.
Watches and Jewelry posted negative organic revenue growth,
declining by 2%, and a rise of 6% based on published figures
(negative impact of exchange rate fluctuations decreasing reve-
nue by 2 points, combined with a positive impact due to
changes in the scope of consolidation of 10 points). The posi-
tive impact related to the integration of Hublot was 10 points.
The year saw a gloomy consumer market in the US and lower
demand in Japan. All this business group’s brands boosted
their sales in Europe and Asia. They posted significant growth
in the Middle East and in Russia.
Selective Retailing posted organic revenue growth of 9%, and 5%
based on published figures. This growth was driven by Sephora,
whose sales were very strong, not only on a same-store basis, but
also due to the expansion of its retail network in Europe, North
America, China and the Middle East. Despite weaker perfor-
mance in tourist regions usually visited by Japanese travelers,
DFS was able to record organic revenue growth overall by bene-
fiting from the strong rise in business generated with customers
from other parts of Asia, and especially Chinese tourists.
The Group posted a gross margin of 11,181 million euros, up
5% compared to the previous year. The margin on revenue was
65%, 0.1 points higher than in 2007.
This increase reflects better control of 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 6,104 million euros,
up 6% based on published figures, amounting to a 9% increase
at constant exchange rates. Over and above robust communi-
cations expenditures 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 35%.
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