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Economy

LVHM Doubles Down With Bigger, Extra-Luxe Louis Vuitton Stores

With Louis Vuitton sales jumping more than 20 percent last year, the LVMH luxury goods group is sprucing (and scaling) up Louis Vuitton sales outlets across the globe.

Looking for new bags at Louis Vuitton store in Paris (Zoetnet)

How do you sell more and more luxury merchandise across the globe, without undercutting an image of craftsmanship and exclusivity? That is the delicate equation facing top executives at French fashion house Louis Vuitton, the star brand of luxury goods group LVMH. It's a balancing act they are achieving today by increasing their production capacity, raising prices on select items, fighting counterfeiting and opening increasingly luxurious stores.

In 2010, LVMH's cash cow was working at full capacity. Even at the height of the global financial crisis, when the luxury goods market was shrinking, Louis Vuitton posted double digit growth. Last year, with the rebound in the market, its sales jumped more than 20 percent, to more than 5.5 billion euros ($7.4 billion), according to analysts. This gives the brand a stellar operating margin of 45 percent, with the handbag and luggage maker generating half of LVMH's profits.

On the retail side, the company is going even more upmarket. The opening in London last May of its New Bond Street "Maison," LVMH's biggest retail space in Europe, set the tone. Boasting a private client suite aimed at VIPs, it is the most luxurious Louis Vuitton sales point anywhere.

"It has enabled us to double sales," says a buoyant Yves Carcelles, chairman and CEO of the brand. This approach now lies at the heart of the group's sales strategy. "Our aim is to enlarge and renew all our stores, to make them all more luxurious," he explains.

Its retail space in Rome, for example, is set to quadruple in size, thanks to the acquisition of an old cinema just off the main Via del Corso shopping drag. Fewer than ten new sales points will open this year, in comparison to about 20 in 2010.

On the manufacturing side, the challenge is to respond to demand, particularly for products made out of the brand's famous LV-monogrammed canvas, which represent 60 percent of sales. Just before Christmas, in order to avoid running out of stock, the Louis Vuitton store on the Champs Elysées in Paris closed its doors an hour early every evening.

"It takes time to recruit and train artisans," explains Bernard Arnault, the CEO of LVMH. "We're increasing the capacity of our workshops and also relying more and more on our subcontractors."

In April, the twelfth French-based workshop is due to open in Marsaz in the southern region of Drome, which will increase production capacity by 10 percent. A few miles away in Saint Donat, a factory that LVMH had been planning to close is now set to be refurbished.

Up until 1977, the company possessed a single production site in Asnières on the outskirts of Paris, dating back to 1854. Today, Vuitton employs 16,000 people, including 3,000 in France. Laser machines are used to cut the leather and canvas. "All the repetitive activities are now done by a machine. But 60 to 70 percent of the work is done by hand," says Patrick Vuitton, a top company executive who represents the fifth generation of the family. "But you know work done by hand isn't always a guarantee of quality."

In spite of this, Vuitton is keen to defend the brand's artisan image. "We have always made quality products, and we intend to remain faithful to our ancestors."

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