LVMH has warned that its operating profit would slump a deeper-than-forecast 20% in 2001, despite saying that consolidated sales for the year ended 31 December increased 5% to reach a record €12.2bn.

It said that it expected the market environment to remain difficult in the first half of 2002, but that operating income is expected to rebound materially in 2002, which limited damage to LVMH's share price. 

LVMH's 2001 operating profit is estimated at €1.56 billion (US$1.38 billion), a 20.4% percent drop from 2000. The fall is 5-10% bigger than forecast when the luxury goods company issued a profits warning in November.

The drop is bigger than the 10-15 percent fall Moet Hennessy-Louis Vuitton LVMH forecast when it warned on 2001 profits in November. But the group also said it expected a sharp rebound in operating profit in 2002.

Sales in the fourth quarter declined by 4% following a dramatic decline in travel related sales as a result of the 11th September tragedies and the growing weakness of the yen, the company said.

However an LVMH statement said that sales had recovered over the quarter and sales to local consumers in the US, Western Europe and Japan continued to grow.

Sales in the company's wine and spirit business group were €2.2 billion, a decrease of 4% compared to 2000.

Champagnes declined by 7% as high customer stock levels were progressively reduced in the key US market. LVMH said that there were "indications at year end that stock levels at distributors have returned to normal, volumes are expected to improve in 2002."

However it also said wine sales had been affected by the Argentine crisis in the last quarter.

Meanwhile Cognac sales were up 6%, compared to the previous year. In particular this was due to a strong performance by Hennessy, whose good US sales compensated continuing decline in Japan.

"The potential of emerging countries, such as Eastern Europe, Korea and China, as well as satisfactory levels of stock in December are very encouraging signs for the health of this business," the statement said.