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Recessions come and recessions go, but luxury never goes completely out of style, even if sales were subdued in the early 2000's. Some individuals with deep pockets and high ambitions are always willing to spend prodigiously on common items like handbags and watches, provided they get what they want in return: quality, fashion and the envy of their friends. While the past couple of years have been difficult for the luxury category as a whole, LVMH has managed to distinguish itself from its competitors. It posted a 30% jump in profits in 2003 while the company's stock has risen 50% in the past 12 months. This tremendous rate of growth can be explained through brand protection and limiting underperforming stores.
LVMH is all about the power of brand, and its stable is jammed with famous names: Upscale leather goods retailer Louis Vuitton, its largest unit; wine and spirit makers Moet & Chandon and Hennessy cognac; fashion lines Donna Karan, Fendi and Givenchy, and others -- watchmaker TAG Heuer, for example, and shirtmaker Thomas Pink. The company's strength owes a lot to customer loyalty -- especially to Louis Vuitton, which analysts estimate accounts for about 60% of LVMH's earnings. Demand for its products -- from $100 coin purses to the new $5,500 Theda multi-buckled, gilt-trimmed handbags in colors such as turquoise and pink -- is so strong that Vuitton's margin topped 45% last year; its U.S. sales alone grew 38%. To meet the demand, Vuitton is expanding. In February 2003 it opened its largest retail center ever, an opulent 14,000-square-foot, four-story store at Fifth Avenue and East 57th Street in Manhattan. It will open an even larger "global" store in Paris at the end of the year, as well as stores in Shanghai and Tokyo's Ginza district. The company also will enlarge a number of leased departments in Saks and...
Louis Vuitton Moet Hennessy A luxury good is a product at the highest end of the market in terms of quality and price. Classic luxury goods include haute couture items such as clothing, accessories and luggage. However, many markets have a luxury segment including, for instance, cars, wine and even chocolate. Luxury goods markets are characterized by very high sensitivity to economic upturns and downturns, high profit margins and very tightly
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