LVMH’s Arnault warns over currency wars

Bernard Arnault struck an upbeat note on Thursday, expressing “confidence” in the year ahead for LVMH, the luxury goods group he heads, but warned of the risk of currency wars that could strengthen the euro and penalise French exporters.

The billionaire chairman and chief executive was speaking after the close of trading in Paris, as LVMH reported a 12 per cent increase in 2012 net profits to €3.4bn.

This was slightly below expectations. Operating profit from recurring businesses was €5.9bn, up 13 per cent, on sales of €28.1bn – both were in line with expectations.

Sales of the group, whose brands include Dior, Louis Vuitton and Dom Pérignon champagne, were 19 per cent higher in reported terms and by 9 per cent on a like-for-like basis.

Mr Arnault said the group’s performance had been “remarkable” given the economic slowdown in Europe. He was optimistic about 2013, but said the euro was likely to strengthen to the detriment of exporters.

“There is a risk of currency wars, of competitive devaluation, which could lead to a scenario in 2013 in which a certain number of currencies weaken,” against the euro. A stronger euro “is unfortunately predictable it seems to me .... and risks having an impact on the business of French exporters,” he said, adding that LVMH would be able to raise its prices to compensate.

Mr Arnault has recently been at the centre of a political storm in France over his application for Belgian dual nationality which he has denied is linked to rising taxes under the Socialist government of President François Hollande. But he declined to answer a question about why he wanted a Belgian passport.

He also said there were no plans to change the structure of the group, which has been criticised for being overly complicated. “I don’t find it very complex for a business of our size,” he said.

Asked about relations with Hermès, the silk scarves and handbags group, which has called on LVMH to sell its 22 per cent stake in the family-controlled company, describing it as “an attack”, Mr Arnault said relations were “peaceful.” “I hope this view will be shared in the future by the managers of Hermès,” he said.

The two sides are in a legal dispute. Hermès’ complaint is focused on the way in which which LVMH entered its capital suddenly in 2010 and alleges insider trading and manipulation of its share price, against which LVMH has counter-complained for “slander, blackmail and unfair competition”.

Mr Arnault said that economic growth in China had been affected by the change in political leadership but expected growth to pick up this year.

Demand in Asia is being closely watched by analysts, given luxury goods groups’ increasing reliance on the region for growth, particularly in China. Last week, Richemont, the Swiss luxury goods group, said sales growth in Asia had stalled during the last three months of 2012.

LVMH said sales in Asia – which accounts for 28 per cent of sales, excluding Japan – rose 8 per cent in the fourth quarter. This was an improvement on the previous three months. It said the US had been particularly strong.

The fashion and leather goods business – mainly Louis Vuitton, which accounts for half group operating profit – reported a 6 per cent rise in operating profit to €3.3bn.

All the other divisions reported double-digit operating profit growth, which will stoke analysts’ concerns that LVMH’s main profits motor, Louis Vuitton, is slowing.

The dividend is raised by 12 per cent to €2.9 a share.

LVMH also said that Pierre Godé, deputy chairman and Mr Arnault’s right-hand man, is to become deputy chairman of the group’s Italian operations. The 68-year-old will remain LVMH deputy chairman.