Chairman’s message
With talent and discipline, our teams have responded to the challenge. We took advantage of this turbulent period, during which our customers sought a return to core values, to recall our heritage of excellence, and the values of creativity and durability which are embodied by the Group’s brands.The future holds excellent potential, in historic markets as well as in emerging markets, for brands which know how to continually inspire their contemporaries, regardless of where they are in the world, and are committed to quality, beauty and authenticity.
At the end of a year marked by an unprecedented global crisis, our Group responded to the challenge set and increased its market share. We owe this performance primarily to the talent of our teams and their perfect execution of Group strategy. The commitment of the men and women in the Group allowed us to combine the disciplined management approach called for by market conditions, with proactivity and efficiency, underpinned by targeted investments and a tradition of high quality creativity.
As in previous difficult periods, our Group demonstrated the soundness of its growth model in 2009 and found the necessary resources to meet new challenges and further its development. Our strategy of focusing our efforts on our star brands, key markets and opportunities offering the best return on investment, bore its fruit. Finally, the reactivity of our organization and the extremely rigorous management of costs and stocks throughout all our businesses, enabled us to preserve an excellent level of profitability at Group level. This has resulted in a current operating margin of nearly 19% and significantly improved cash flow.
In 2009, Christian Dior Couture was fortified by the strength of its brand and its judicious strategy. Its resolutely upscale positioning – further reinforced this year – is built upon an exceptional reservoir of know-how, dedicated to the service of excellent creative talents, and is rooted in the brand’s long standing role as one of the highest-ranking luxury industry leaders. This year’s haute couture collections, reconnecting with the origins of the House of Dior, were unveiled in the original setting of 30 Avenue Montaigne, and have been remarkably successful.
This approach has continued to attract a very demanding clientele, passionate about creativity and increasingly sensitive to enduring product quality. In 2009, it resulted in strong sales growth for star categories such as leather goods, where the exceptional success of the Lady Dior handbag was reinforced by similarly inspired new lines such as Le Granville or Le Trente. Ready-to-wear consolidated its performance, while Dior Homme achieved remarkable growth on all continents.
Dior’s time-honored upscale positioning represents a decisive advantage for the brand’s international development, which was the focus of ongoing efforts during the year. A number of high-impact boutiques were opened, including the Dubai Mall and several new locations in China, all of which achieved instant commercial success, raising the brand’s image to the very highest level in these markets.
Operating profit has been improved thanks to the modern supply chain that is now in place following the investments made in previous years, lower inventory levels, and measures to rein in operating costs. These efforts, and the initial results for 2010, are encouraging signs for the future.
At LVMH, the diversity of our businesses helped boost our resilience: while our Wines & Spirits and Watches & Jewelry brands, which are exposed to the impacts of destocking by distributors and retailers, were hit particularly hard by the crisis, businesses where we are in direct contact with our customers through our own store networks show a more favorable trend.
It is worth highlighting that the teams across all our businesses have registered some real successes: Louis Vuitton had an exceptional year, achieving double-digit global growth and progress in all of its product categories. Sephora continued to forge its unique approach in the world of beauty products and to expand in different regions of the world.
Thanks to the success of its innovation strategy (Hennessy Black and Hennessy VS 44 in honor of Barack Obama…) and through intense ground work, Hennessy returned to growth in the United States during the year and strengthened its position in a market which had a particularly difficult 2009. Parfums Christian Dior continued to illustrate its roots in the world of couture with power and modernity, drawing on both the extraordinary vitality of its iconic lines (Miss Dior, J’adore, Eau Sauvage…) and the quality of its innovations in skincare and make-up. TAG Heuer confirmed its technological advance and succeeded in marketing, among other products, the Monaco V4, a watch whose concept is revolutionizing the watch-making industry.
Hublot, which recently joined the Group, won a first prize in Geneva for the third time in five years. Make Up For Ever continued its remarkable growth in the United States, France and China. Marc Jacobs and Benefit, two of our youngest brands, have continued to shine and to grow despite the difficult environment in 2009.
There is one other point which I think is essential to highlight: we have consistently adhered to a strategy of value and long-term vision which is the lifeblood of our Group. We took advantage of this turbulent period to recall our fundamental strengths, our heritage of excellence, and the values of creativity and durability which are embodied by the Group’s brands – brands whose stature and image never cease to grow. As witnessed by the rebound registered by all our businesses at the end of the year, this strategy has not been compromised within the Group and has put us in an ideal position to prepare for the future.
We will approach 2010 with confidence and determination but will not abandon the prudence demanded by the continuing uncertain environment. If worldwide economies manage to exit from the crisis, it is more than likely that their recovery will be progressive and staggered. It would be rash to forecast a date for a solid global recovery. For this reason, we will not relax our management efforts and will continue to focus on only truly profitable, strategic opportunities with an extremely selective allocation of our resources.
Once this cyclical slowdown is behind us, I am convinced that the future holds excellent potential, in historic markets as well as in emerging markets, for brands which know how to continually inspire their contemporaries, regardless of where they are in the world, and are committed to quality, beauty and authenticity. This is our ambition, upheld by the Group’s employees, and each year this enables us to build and strengthen the global leadership of our Group.
Bernard ARNAULT
