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  • A N N U A L R E P O R T 2 0 0 1 P A S S I O N A T E A B O U T C R E A T I V I T Y

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  • 2 Chairmans message4 Financial highlights6 Highlights8 Board of Directors

    and general management9 Corporate governance10 The LVMH share12 Shareholder relations

    Passionate about creativity

    14 Developing the star brands of luxury16 Cultivating the exceptional18 An environment in which talent thrives22 Protecting the environment26 Good corporate citizenship

    30 Wines and Spirits42 Fashion and Leather Goods52 Perfumes and Cosmetics58 Watches and Jewelry70 Selective Retailing76 Other activities

    77 Consolidated financial statements

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  • A coherent universe of men and women pas-sionate about their business and driven bythe desire to innovate and achieve. An unri-valled group of powerfully evocative brandsand great names that are synonymous withthe history of luxury. A natural alliancebetween art and craftsmanship where creativ-ity, virtuosity and quality intersect. A remark-able economic success story with over53,000 employees worldwide and global

    leadership in the manufacture and distributionof luxury goods. A unique blend of globalvision and dedication to serving the needs ofevery customer. The successful marriage ofcultures grounded in tradition and elegancewith the most advanced marketing, industrialorganization and management techniques. Asingular mix of talent, daring and thorough-ness in the quest for excellence. A uniqueenterprise that stands out in its sector. Ourphilosophy can be summarized in twowordscreative passion.

    P A S S I O N A T E A B O U T C R E A T I V I T Y

    PROFILE LVMH Annual report 2001 1

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  • LVMH Annual report 2001 CHAIRMANS MESSAGE2

    The slowdown of the worlds economies, the shock ofthe attacks of 11th September and their grave geopo-litical consequences, very poor short-term visibilityfor economic and financial markets : these were alldefining characteristics of 2001. The accomplishments of our teams in this exception-ally unstable environment were remarkable. Thanksto their talents, their efforts and their great ability tobe reactive, our activities continued to grow, sus-tained by the entrepreneurial and innovative spiritwhich is at the very foundation of our position of

    leadership and whichallows us to gain mar-ket share, even whentimes are difficult.

    Excellent progressfor our greatestbrands The performance ofthe great brandswhich are at the heart

    of our business was excellent. Louis Vuitton saw fur-ther growth and its new products, which accountedfor 18% of the years sales, are objects of infatuation.Parfums Christian Dior saw numerous successes andHennessy continued to gain ground in the UnitedStates (with volumes up 11% in 2001) and Asia.These are just a few noteworthy examples. Activities in their development stage are also on tar-get, with the Watches and Jewelry division makinggood headway in 2001, setting up an organisational

    structure and layingthe foundations forfuture growth. Theseefforts are paying off :our watch brands havealready gained marketshare across the geo-graphic board.DFS, where activitiesare very closely linkedwith the tourist cycle, suffered from the slowdown ininternational travel seen in the fourth quarter of2001. In the current, exceptionally difficult, econom-ic climate, a rigorous cost reduction program hasbeen put into action, paving the way for a consider-able improvement in results from DFS in 2002 andincreased profitability thereafter. With 23% sales growth, the Sephora concept is nowfirmly established in both Europe and the UnitedStates. After some restructuring and now concentrat-ing on its best-performing markets, Sephora shouldreach the threshold of profitability this year and movebeyond it in 2003.

    Developing new stars Our strategic priority is growing our star brands theGroup has the largest collection of star brands in theworld and they are key profit drivers. We are also nur-turing the growth drivers of the future. The develop-ment model of the "icons" of the luxury universe -Louis Vuitton, Christian Dior, Dom Prignon,Fendi, Hennessy, TAG Heuer to mention a few, is

    Our star brands growthmodel encourages risingstars to blossom.

    We have once again gainedmarket share thanks to ourpeoples talent, hard workand responsiveness.

    Bernard ArnaultChairman and CEO

    CHA IRMANS MESSAGE

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  • CHAIRMANS MESSAGE LVMH Annual report 2001 3

    the inspiration for our flourishing rising stars -Donna Karan, Fresh, Pucci, or Zenith Weacquired these companies recently because they havestrong potential and all the qualities necessary forprofitable, long-term growth with support from theGroup and its unique expertise in brand develop-ment. We manage them in the same way as the moreestablished brands respecting their unique charac-ter while giving them the means to cultivate their cre-ativity, broaden their territory and strengthen theirglobal image and profile.

    Focusing on cash flow and profitability Cash generation is a management priority for all ourteams. Recovery measures taken for activities affectedby the economic climate and increased selectivity ininvestments have been driven by this goal. We arefocusing on allocating resources to the most profitableactivities and markets and disposing of non-core assets,whether real estate or financial. The disposal of theGucci stake is the best illustration of this the agree-ment was signed in excellent conditions on 10thSeptember 2001 and the proceeds financed all ourinvestments in Italy, thanks to a capital gain of 774 mil-lion Euros realized on what has been a particularlyprofitable investment. Improved currency hedging and falling interest rateswill be just some of the favorable factors we expect inthe coming months.

    Teams strongly motivated towards future growth LVMH is in an excellent position to look ahead to thefuture. We have lived through economic crises before,emerged stronger and bounced back quickly, thanksto our powerful brands and our flexible, reactiveinternal resources. Despite currently weak visibilityas to when the economic recovery will come, weenvisage a significant rebound in the Groups resultsin 2002. This growth might accelerate if the econom-ic climate improves in the second half. In the longer term, the future will be shaped by thecontinued development of the luxury market, whereLVMH is the global leader. Our success, constantgains in market shareand lead on all of ourcompetitors will con-tinue to be driven bythe creativity of ourproducts, the excep-tional talent of thew o r l d s g r e a t e s tdesigners within theGroup, our highlyeffective managers,the faultless attention we pay to the quality of ourproducts and the satisfaction felt by our clients.

    Bernard Arnault

    The rebound forecast for2002 could pick up alongwith economic growth in thesecond half.

    We are bolstering our positions,taking action and bouncing back.

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  • LVMH Annual report 2001 FINANCIAL HIGHLIGHTS4

    Net sales by business group

    Income from operations by business group

    EUR million 2000 2001

    Wines and Spirits 2,336 2,232

    Fashion and Leather Goods 3,202 3,612

    Perfumes and Cosmetics 2,072 2,231

    Watches and Jewelry 614 548

    Selective Retailing 3,287 3,475

    Other businesses and eliminations 70 131

    Total 11,581 12,229

    EUR million 2000 2001

    Wines and Spirits 716 676

    Fashion and Leather Goods 1,169 1,274

    Perfumes and Cosmetics 184 149

    Watches and Jewelry 59 27

    Selective Retailing (2) (194)

    Other businesses and eliminations (167) (372)

    Total 1,959 1,560

    F INANC IAL H IGHL IGHTS

    EUR million 1999 2000 2001

    Net sales 8,547 11,581 12,229

    Income from operations 1,547 1,959 1,560

    Operating margin 18.1% 16.9% 12.8%

    Net income before amortization of goodwill and unusual items 738 846 334

    Earnings per share before amortization of goodwill and usual items (EUR) 1.53 1.75 0.68

    Net income 693 722 10

    Dividend per share including tax credit (EUR) 1.02 1.13 1.13

    Cash flow from operations 1,051 1,214 919

    Capital expenditures (1) 574 857 984

    Stockholders equity (2) 7,781 8,512 8,701

    Net financial debt to equity ratio (2) 95% 87% 95%

    (1) Acquisitions of intangible and tangible long-term assets (2) Includes minority interests

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  • FINANCIAL HIGHLIGHTS LVMH Annual report 2001 5

    365USA

    21South America

    4Middle East

    226Asia

    215Japan

    32Pacificregion

    266France

    372Europe

    Number of stores

    1999 2000 2001

    1,005 1,286 1,501

    Store network at December 31, 2001

    Net sales by geographic region of delivery(EUR million and %)

    16% France 1,86917% Asia (excl. Japan) 1,998

    8% Other markets 884

    18% Europe (excl. France) 2,038

    15% Japan 1,74926% United States 3,043

    17% France 2,02516% Asia (excl. Japan) 1,999

    7% Other markets 912

    19% Europe (excl. France) 2,283

    15% Japan 1,81626% United States 3,194

    Net sales by currency(EUR million and %))

    29% Euro 3,3364% Dollar Hong Kong 539

    16% Other currencies 1,863

    16% Yen 1,82435% US Dollar 4,019

    31% Euro 3,7785% Dollar Hong Kong 573

    16% Other currencies 1,969

    16% Yen 1,93032% US Dollar 3,979

    2000

    2001

    2000

    2001

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  • P A S S I O N A T E A B O U TC R E A T I V I T Y

    LVMH Annual report 2001 H