LVMH Moet Hennessy Louis Vuitton SA, the largest luxury-goods maker, missed analysts' profit estimates and slashed its budget for new stores, calling the economy the worst since the Great Depression, Bloomberg reported.
Net income dropped 4.2 percent to 1.14 billion euros ($1.5 billion) in the six months ended in December, pulled down by flagging liquor sales, Paris-based LVMH said today. That trailed the 1.19 billion-euro median estimate of seven analysts surveyed by Bloomberg and was the first decline in six-month earnings since the first half of 2002.
LVMH plans to reduce capital investment by as much as 15 percent this year. The company won't cut advertising expenses or discount Louis Vuitton products even as the financial crisis crimps demand for the most expensive luxury goods.
"We need to plan for the worst and hope for the best," Chairman Bernard Arnault said at a presentation in Paris after the report today. He wouldn't give any forecasts and said he wasn't sure the crisis would end this year.
LVMH and rivals including Salvatore Ferragamo SpA are scaling back ambitions after announcing a wave of planned store openings in recent years as consumers pull back, eroding sales in the 175 billion-euro luxury-goods market.
"They are going to focus on key markets and key products," said John Guy, an analyst with MF Global Securities in London in a telephone interview after the report. Guy has a "neutral" rating on the stock and a 54-euro target price.