LVMH, the world's largest luxury goods conglomerate, reported profit from recurring operations exceeded EUR4 billion for the first time, driven by "strong" results from units including DFS and Sephora, "which continue to increase their lead over competitors across all regions in which they operate".
The "Selective Retailing" business group, which includes airport retailer DFS, recorded revenue growth of 19% in 2010 and an increase of 38% in profit from recurring operations.
LVMF stated DFS’s performance was due to the rise in international travel, notably among Asian tourists. The Gallerias of Hong Kong, Macau and Singapore enjoyed "remarkable" growth and benefited from the investments made in renovation and expansion, while new operations in India, the Middle East and Vietnam are "promising."
The company stated that, "after an exceptional 2010, LVMH is well equipped to continue its growth momentum across all business groups in 2011". LVMH recorded a 19% increase in revenue in 2010, exceeding the EUR20 billion mark for the first time.
Investors were less impressed, sending the company's shares down. Morningstar stated it plans no change in its fair value estimate, "as we believe our long-term forecast adequately captures the firm's cash flow generation potential". It added, "LVMH is following a similar pattern among the luxury goods companies: Growth and profits for the year are breaking records but are slowing sequentially on a quarterly basis. Recall that the first signs of a rebound in luxury demand appeared in late 2009 and companies are cycling past very strong 2010 increases. Firms now face the toughest comparisons (in percentage terms) during the first and second quarters of 2011".
Selected airport suppliers daily share price movements (% change): 04-Feb-2011