LVMH May Buy Spirit, Watch Brands in Any Downturn

By Sara Gay Forden April 16 (Bloomberg)

LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury goods maker, may take advantage of a downturn in the industry by acquiring a liquor or watch brand, Group Managing Director Antonio Belloni said.

"There might be opportunities in a difficult market for a group like ours to round out our portfolio,'' especially if smaller, family-owned companies decide to sell, Belloni said in a telephone interview today.

The Paris-based company reported sales growth that surpassed analysts' estimates after markets closed yesterday, sending its shares up as much as 5.3 percent today. Improved demand for Louis Vuitton handbags and Christian Dior fragrances helped the company withstand waning consumer confidence in the U.S. and U.K. and declining wine and spirit sales.

LVMH, whose more than 50 brands include Veuve Clicquot champagne, could buy a tequila or whisky label, as well as jewelry businesses to complement its Tag Heuer, Zenith and Chaumet units, Belloni said.

Belloni said LVMH has cash for acquisitions and will lower its debt-equity ratio to a range between 25 and 30 percent by year-end. He declined to specify any companies LVMH may be interested in. He's the second-ranking executive at LVMH after Chairman and controlling shareholder Bernard Arnault, France's richest man, and joined the company in 2001.

Bulgari Speculation

Analysts have said Rome-based Bulgari SpA may be an attractive acquisition target for LVMH, and the company may return cash to investors if it doesn't make any purchases.

"I can't exclude a cash return at some point in the future, although our clear focus remains on building the brands and the business,'' Belloni said. He said LVMH plans to keep lifting its dividend in line with results.

Bulgari is a "fantastic'' company, Belloni said, adding that he doubts the company's owners want to sell. Bulgari shares rose 28 cents, or 4.1 percent to 7.13 euros at 3:35 p.m. in Milan, giving the company a market value of 2.1 billion euros.

The Rome-based jeweler isn't for sale, Bulgari Chief Executive Officer Francesco Trapani said in a subsequent e-mail today. Brothers Paolo and Nicola Bulgari and Trapani, their nephew, own about 52 percent of the shares.

Conference Call

Chief Financial Officer Jean-Jacques Guiony, speaking on a conference call today, said an acquisition wouldn't necessarily preclude returning cash to shareholders, depending on its size. He said the issue is "a bit theoretical'' to discuss now.

LVMH said yesterday that growth will continue this year in the face of a "challenging monetary environment and an uncertain economic climate.'' It raised prices on champagne and luggage to combat the higher euro, which cuts the value of sales in other currencies. The dollar lost 10 percent against the euro last year, while the yen fell 5 percent.

Analysts have been lowering forecasts for luxury-goods companies since November amid concern demand will decline as Americans and Britons face the worst housing markets in a quarter-century.

Belloni said U.S. department-store sales were "difficult'' in March, though overall revenue is "holding up'' as the economy slows. He said tourists shopping in Manhattan are offsetting weaker demand in other parts of the country.