French luxury retail giant LVMH has slashed its budget for new stores and cut capital expenditure by up to 15 per cent this year to help it steer through the global slowdown.

The company, which owns brands including Louis Vuitton, Thomas Pink and Sephora, said it would not cut advertising or introduce discounts on Louis Vuitton, despite being hit by the downturn in its second half. Income fell 4.2 per cent to E1.14bn (£997m) in the six months to the end of December.

LVMH chairman and chief executive Bernard Arnault said: “The group has always emerged stronger from previous economic downturns thanks to the dynamic innovation of its brands, the quality of its products and effectiveness of its teams.”

He added that LVMH would focus on increasing its leadership in the luxury goods market worldwide in 2009, but would not give forecasts for the year.

Full-year revenue at LVMH grew 4 per cent to E17.2bn (£15bn) in 2008, with profit from recurring operations up 2 per cent to E3.6bn (£3.2bn).

Sales at its fashion and leather goods division rose 7 per cent, driven by double-digit revenue growth from Louis Vuitton. LVMH said the Asian markets in which it operates are proving resilient but that more mature markets, particularly the US, remain challenging.

Bernstein senior analyst Luca Solca welcomed LVMH’s decision to cut its capital expenditure. He forecast that the retailer will focus on its strongest divisions and that its Louis Vuitton arm will perform far better than the industry average this year.

He added that despite LVMH’s strong group performance, the luxury sector in which it operates is not immune to the downturn. Other luxury retailers, including Burberry, have already announced plans to cut costs to help them in the downturn.

“Scale is very important in this business and LVMH has an advantage versus smaller brands,” said Solca. “The slowdown will hit all price points."

Topics