French luxury goods company LVMH said its sharp decline in profits to €10 million from €722 million last year was owed to restructuring charges relating to its Sephora and Duty Free Shops.
The company did not say how much the charges were but said they were partly compensated by €864 million capital from the sale of Gucci shares at the beginning of September, ahead of the sharp decline in financial markets.
LVMH said that despite an uncertain market that could continue throughout 2002, it is targeting a significant increase in operating income this year.
It said sales in the first two months of this year were up 9 per cent versus the same period last year.
Operating losses at its selective retailing division deepened to €194 million from a loss of €2 million posted last year. It said the sudden slowdown in the travel retail market following September 11th created difficult conditions for its DFS business.
"In order to address this situation radical steps are being taken to lower breakeven by cutting costs through the closure of non-strategic stores, renegotiated airport concessions and very significant reductions in central costs," the company said.
It said these measures will allow the company to make considerable cash-flow improvements in 2002 with the aim of returning the division to profitablity in the second half.
Perfumes and cosmetics' operating income slipped to €149 million from €184 million last year. LVMH said that in spite of the slowdown in demand following September 11th the division outperformed the market.
AFP