Louis Vuitton

New Product Introductions vs Product

Availability

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Case study

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Reference no 608-011-1

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This case was written by Professor Pierre Dussauge,HEC and Assistant Professor
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 608-011-1

Louis Vuitton:
New product introductions vs. product availability

In the spring of 2006, Yves Carcelle, CEO of Louis Vuitton, the largest and most profitable subsidiary
of LVMH (Louis Vuitton-Moet Hennessy), the #1 luxury goods company in the world, was called upon
to arbitrate a ongoing conflict between the company’s vice president for marketing and sales and the
vice president for manufacturing and logistics. For several months, these two senior managers had
been bickering about how to solve the out-of-stock problem Louis Vuitton’s 340 company-owned
stores around the world were increasingly faced with. The vice president for marketing and sales
blamed the situation on the lack of flexibility and responsiveness of the company’s supply chain, while
the vice president for manufacturing and logistics faulted the recent increase in new product
introductions, combined with very poor forecasting of demand. Yves Carcelle had mixed feelings
about the whole issue. On the one hand, close to perfect quality was critical in a business where

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customers might be paying up to €1000 for a pair of shoes and €3000 for a handbag, and he felt very
reluctant to disrupt Louis Vuitton’s traditional and proven manufacturing process. On the other hand,

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the rapid pace of new product introductions had been a decisive factor in the company’s 20% average
growth rate in the previous three years and, in a business like that of Louis Vuitton, it was very difficult

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to predict how customers would respond to new products, no matter how much money, time and effort
were spent on market research. Still, despite the advantages resulting from the snob-appeal attached
to those products that turned out being hard to purchase, the opportunity cost of stores being out of
products customers wanted had to be very high. So Yves Carcelle was determined to find an
appropriate solution to the problem very rapidly.
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The Luxury Good Industry

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Luxury goods have alternatively been described as “products no one needs” or as “items that serve
little purpose in the lives of consumers, except to fulfill dreams”. With such a fuzzy definition, it was no
wonder the precise boundaries of the “luxury goods industry” remained blurred, at best. While haute
couture, perfume and jewelry unquestionably belonged to the universe of luxury, segments of many
other industries such as the hotel business, the automobile industry, wine and spirits, or even the
airline industry might also have qualified as luxury businesses.

Very broadly speaking, products traditionally considered to be luxury goods pertained to two main
categories:

1. Products targeted at individuals, which were often derived in one way or another from haute
couture. This first category of luxury goods included such products as designer clothes, leather
goods, shoes, eyeglasses, jewellery, watches,
2. Accessories, perfumes and cosmetics. Demand for fashion-related items was growing very rapidly.
This growth was fuelled primarily by the ever-expanding variety of accessory lines offered by luxury
brands. In contrast, jewellery and watches were experiencing much slower growth.
3. Home furnishings and decoration, a more recent development in the luxury goods sector; this
primarily covered china, crystal and silverware, and also included household linen, lighting and
some furniture. This second category was growing very rapidly but only accounted for a fraction of
the whole sector.

This case was developed by Pierre Dussauge and Valérie Moatti as a basis for class discussion rather than
to illustrate either effective or ineffective handling of a management situation. Some of the data provided in
this case have been altered for confidentiality or pedagogical reasons.
© (2008)(ESCP-EAP & HEC)All rights reserved.
Winner of the 2007 EFMD case writing competition (supply chain management category).

SPE 685 K-A 07-04

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Overall, the luxury-goods sector had enjoyed very rapid growth for over 20 years. This was made
possible by progressively opening up the market to a much wider range of customers. Very wealthy
clients had traditionally been the major segment targeted by luxury brands but, in more recent years,
the market was opening up to a wider set of potential buyers. Luxury goods were no longer reserved
to an elite, but had come within reach of an increasing number of people. These new customers were
younger and made more occasional purchases. Sales were very seasonal and purchases made
during the holiday season accounted for a disproportionate share of the business. Customers of such
expensive items were very demanding. And as luxury goods were by no means essential, sales were
very sensitive to the overall economic climate.

Most top luxury brands originated from either France or Italy and, in more recent years, from a few
other countries, Spain and the United States in particular. Two major types of companies operated in
the luxury-goods business: on the one hand, large conglomerates built-up through the acquisition of
numerous specialized brands had emerged during the 1980s and 1990s. The three world leaders
were LVMH (Louis-Vuitton-Moët-Hennessy), Richemont which owned such famous brands as Cartier,
Lancel, Van Cleef & Arpels, Montblanc,.., and Gucci, owner of Yves Saint Laurent, Balenciaga, Stella
McCartney and Boucheron among others. On the other hand, small, often family-owned companies

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such as Hermes, Lonchamp or Rolex had also managed to thrive in the luxury goods business. In
recent years, the luxury goods sector had been hit by a wave of mergers and acquisitions, with over

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100 brands being taken over in 2000 and 2001 alone.

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Western Europe, North America and South-East Asia were the three largest markets for luxury
brands. Asia, and most notably Japan, had accounted for a major portion of the growth of the industry.
But in the second half of the 90s, the economic downturn in Asia had led many luxury brands to focus
their efforts on North America as well as on other emerging parts of the world such as South America,
Eastern Europe or India.
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LVMH

Formed in 1987, LVMH rapidly expanded to become the world leader in luxury goods. In 2005 it
achieved €14 billions in sales with a 20% operating margin and a 10% net margin. The company
employed 61,000 people worldwide (68% of whom were based outside of France) and owned over
1700 retail outlets throughout the world. In 1999 and 2000, LVMH’s sales grew 23% and 35%
respectively, with net profits in the range of 8% to 10%. In 2001 and 2002, LVMH registered lower
growth rates (3.8% only in 2002) because of the downturn in the global economy, of unfavorable
exchange rates, and also because of poor performance in several of its newly acquired businesses (in
particular in watches, jewellery and retailing).

It took Bernard Arnault, the CEO of the company, less than a dozen years to build up LVMH through
the acquisition of numerous luxury brands, expansion into retailing and an aggressive globalization
strategy. LVMH was named after the first two companies that were merged in 1987 to create the
company: the luggage and leather-goods maker Louis Vuitton and the Champagne and Cognac
producer Moet-Hennessy. In subsequent years, many more famous luxury goods producers were
taken over and added to the conglomerate’s brand portfolio: Christian Dior, Guerlain, Kenzo, Donna
Karan, Céline, Dom Pérignon, Tag Heuer, Loewe… LVMH also entered selective retailing by taking
over DFS (Duty Free Shopping, the world’s largest chain of airport shops) in 1996 and Sephora in
1997. LVMH’s expansion into retailing proved less successful than expected: DFS saw its profits drop
66% and its sales decline by 16% the year after it was acquired; this was blamed primarily on bad
timing, with Asia, where most DFS stores were located, entering a deep recession shortly after the
acquisition by LVMH was carried out.

In 2005, LVMH owned over 50 well-known brands operating in five main sectors: Wines & Spirits
(which accounted for 19% of sales), Fashion & Leather goods (35% of sales), Perfumes & Cosmetics
(16% of sales), Watches & Jewellery (4% of sales) and Selective Retailing (26% of sales). Appendix
#1 lists the main brands controlled by LVMH. The two divisions on the basis of which LVMH was
originally founded (Fashion & Leather goods and Wines & Spirits) were clearly the most profitable,
with 2005 operating margins of 30% and 33% respectively. LVMH’s sales were fairly evenly distributed
between their three main geographic markets: Europe accounted for 35% of total sales, Asia for 31%
and the United States for 27%.

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While each individual brand enjoyed a great deal of autonomy, LVMH nevertheless tried to leverage
potential synergies existing within the entire company. For example, outlet locations were closely
coordinated across brands in order to benefit from clustering effects (the idea was for customers to be
attracted by one brand’s store and then drift on to other luxury brand outlets, which allowed for
enhanced cross selling). Also, in all countries except France, all the brands operating under the same
corporate division would share the same vice president for finance and the same VP for human
resources: "This allows us to transfer salespeople from one store to another or to appoint as
managers of a new store people who have already demonstrated their abilities working for a different
brand" explained one of LVMH’s senior managers.

Louis Vuitton was clearly one of LVMH’s flagship brands. Though the company did not disclose
detailed figures on each brand1, it was estimated that Louis Vuitton alone accounted for about 80% of
the total sales of the Fashion & Leather goods division. Also, according to most analysts, Louis Vuitton
contributed to approximately 60% of LVMH’s total profit.

Louis Vuitton

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Set up in 1854 by a young trunk-maker by the name of Louis Vuitton, the company started out by

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designing and manufacturing innovative stackable trunks and by marketing them through a company-
owned sales outlet located in Paris. Then, in 1876, the company introduced luxury trunks with

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detachable frames. Initial success enabled the firm to set up a store in London as early as 1885. Louis
Vuitton's son, Georges, created the legendary Monogram design that incorporated his father's LV
signature that was to become famous the world around. In 1959, Georges' grandson invented a new
chemical process to produce a highly resistant yet soft coated canvas to be used for both stiff luggage
and soft bags. The Monogram collection still accounted for over 50% of the company's global sales in
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2005! In more recent years, further classic leather-goods lines were launched and turned out being
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highly successful. In 1985, the Epi collection was introduced, first in black and brown shades then
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expanded to include new bright colors. The Taïga line was launched in 1993, followed by the Cuirs
Exotiques line in 1995. The Damier line was manufactured on a large scale in 1996 for the
Monogram's 100th anniversary and was such a success that it soon became a permanent Louis
Vuitton collection.

Louis Vuitton’s major expansion occurred quite late, under the chairmanship of Henri Racamier, a
retired executive and a graduate of HEC, who happened to be married to an heiress of the Vuitton
family. In 1977, when Racamier took over the family-run company, total sales were about €10 million;
by 1987 they had increased to over €600 million. In 1987, Henri Racamier decided to merge Louis
Vuitton with Moët-Hennessy to form LVMH. One year later, Bernard Arnault, who was then the CEO of
Dior, made a takeover bid for the recently formed LVMH group; after a long and bitter legal battle,
Arnault eventually managed to take over the company in 1990.

In 2005, Louis Vuitton was still the largest and by far the most profitable subsidiary of LVMH. 2005
sales were estimated to be around €3.8 billion. From 1987 to 2005, Louis Vuitton enjoyed an average
annual growth rate in the range of 12%. Operating profit was estimated to be about 45%, way above
the industry average of 25%. Leather goods, in particular the legendary Monogram collection of
luggage and handbags, continued being the company’s main line of business. In 2005, Asian sales
accounted for 50% of the company's business and Japan alone accounted for 30%. The company
employed 9,500 people, operated 8 plants and over 340 stores worldwide. 60% of the workforce was
based outside France.

Louis Vuitton’s lines of business

Louis Vuitton organized its business into four major product lines:

- “Leather goods”, essentially bags and luggage –most of which were in fact not made primarily of
leather– were the company’s core business. This business accounted for an overwhelming portion of
total sales. Most leather goods collections were classic products with extremely long life cycles -

1
As a consequence, all figures on Louis Vuitton presented in this case are analyst and case writer estimates

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several decades in many cases -, while fashion-driven products with a short life span only accounted
for 20% of sales.
- “Shoes” were a recent product line extension for the company. Shoe designs were highly seasonal
and most models had to be renewed very frequently, at least twice a year.
- “Designer clothes and ready-to-wear lines” came in two annual collections, one in the winter and one
in the summer. In addition, more specific lines of clothes were produced on special occasions, such
as the Louis Vuitton Cup (a major sailing competition sponsored by the brand and considered to be
the second most prestigious sailing event in the world, second only to the famous America’s Cup).
- “Accessories”, that included watches, eyeglasses, perfumes, jewellery and writing accessories were
a very diverse group of products, most of which had a very short life cycle.

It was not until 1998 that Louis Vuitton departed from its exclusive focus on bags and luggage. That
year, the company introduced for the very first time both a line of shoes and a collection of ready-to-
wear clothes. Watches were introduced in 2002 and it was not until 2004 that the first full line of Louis
Vuitton jewellery was created. Louis Vuitton outsourced the production of all its accessories and the
manufacturing of its shoes. Despite all these various line extensions, leather goods still accounted for
87% of the company's total sales in 2005.

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As it was the case with most luxury goods firms, Louis Vuitton’s cost of goods sold only accounted for

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a small fraction of total costs. According to most estimates, COGS was no more than 15% of total
sales. In turn, logistics accounted for 13% of COGS. Despite very high design and marketing costs,

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Louis Vuitton’s operating margin was estimated to be at least 45%.

Manufacturing and logistics

Louis Vuitton relied on a limited number of highly specialized suppliers, most of which were based in
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France and in a few neighboring European countries. Major raw materials were leather and canvas.
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Louis Vuitton’s purchases were thought to account for over 50% of the global production of the grade
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of soft leather that the company used. All other components, such as clasps and clips, were made to
order and accounted for only a very minor portion of costs. It took on average 6 to 8 weeks for major
supplies to be delivered. As a consequence, Louis Vuitton maintained 2 ½ months of raw material
inventory.

The only product line that Louis Vuitton manufactured in-house was its “leather goods”. The 1200
SKUs (stock keeping units) in this line were manufactured in 8 facilities (6 were located in France, 1 in
Spain and 1 in the US) employing a total labor force of 3,600. A major motivation for maintaining most
manufacturing activities in France was the “made in France” label which was seen as very valuable by
some customers, notably in Asia. The plant located in the US only served that local market though
many products sold in North America were still shipped from abroad. Louis Vuitton occasionally
outsourced some manufacturing when production capacity was too tight. Production planning – as well
as raw materials procurements – was scheduled based on volumes forecasted by the logistics
department.

A tradition of craftsmanship continued to prevail within the Louis Vuitton manufacturing process. One
facility still produced customized, made-to-order trunks; 100 such trunks, each requiring about 110
hours of work - and selling for about €12,000 -, were produced every year. And, strange as it may
seem, this tiny market was growing by 20%! Even for more “standard” products, the manufacturing
process was very labor intensive, required highly skilled employees and was aimed at ensuring very
high quality standards. It was estimated that over 80% of the tasks carried out in the manufacturing of
a Louis Vuitton bag were done by hand; a team of 24 could make no more than 120 handbags per
day. As a consequence, training was essential. In particular, workers were trained for months before
new product introductions. Nevertheless, some tasks were highly automated and Louis Vuitton took
great pride in how it was able to successfully combine sophisticated manufacturing technology with
highly skilled craftsmanship. Multi-tasking within the manufacturing process was widespread, allowing
for a great deal of flexibility and responsiveness. Average manufacturing cycle-time for bags (i.e. the
time work-in-progress spent in the plant) was 6 days.

Because of steady growth in sales, the number of manufacturing facilities increased dramatically after
1995. From 1999 to 2004, four new plants were set up to satisfy the rapidly increasing demand for
Louis Vuitton products.

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A single warehouse located in Cergy-Pontoise, France, globally centralized the logistics function for all
plants. Its capacity was doubled between 2000 and 2003. Goods manufactured in Louis Vuitton's
European plants were forwarded daily to the logistics center. On average, products remained for about
a month in storage at Cergy-Pontoise. In addition to its leading role in organizing flows and managing
inventory, the logistics center also handled returns (faulty, damaged, out-of-fashion and other unsold
products). On average, 2% of all fashion-related, short-life-cycle products had to be disposed of every
year. This was a heartbreaker and was perceived very negatively within a company that prided itself
with manufacturing such high-quality –and expensive- products. As a senior manager for
manufacturing and logistics put it: “if our marketing staff were better able to anticipate demand, or
were in less of a hurry to stack stores up with products for which we have no sales record, I am
convinced we could cut the number of returns in half”.

Louis Vuitton also operated 5 backup warehouses throughout the world. They provided the company
with storage facilities in areas where operating out of the central logistics center would have proved
too complicated because of distance or because of difficult access.

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Distribution

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Louis Vuitton-owned stores handled a large share of the company’s sales. Although Louis Vuitton
products were available the world over, most company-owned retail outlets were located in Europe,

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the US and Japan. The total number of such outlets grew from 230 in 1998 to over 340 in 2005. In
addition, Louis Vuitton leased specific areas in department stores which were known as "shops in the
shops" and covered about 45 to 50 square meters (450 to 500 square feet) in shopping space. About
50 of the 340 Louis Vuitton stores carried all major product categories: leather goods, shoes, designer
clothes and accessories; 100 of them carried leather goods and shoes while the rest only offered
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leather goods.
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Louis Vuitton had been expanding its retail network into new regions of the world: in 2003, it opened
its first stores in India and in Russia and created a 900 square meter store in Tokyo; in 2004, it opened
its first store in South Africa and added new stores in China and Japan. In 2005, it opened new stores
in Hong Kong, Beijing, Las Vegas and Okinawa, and expanded its flagship store in Paris (on the
celebrated Champs Elysées) to 1,600 square meters, making it the largest luxury store in the world
…and the 6th most visited “monument” in France.

Once a month, all store managers had to draw up an estimate of their replenishment requirements
and place an order with the company’s central logistics center in Cergy-Pontoise. These orders were
then recorded and processed: availability of the requested products was checked and shipping
organized. All shipping had traditionally been by boat though, in recent years, the company had
sometimes had to turn to airfreight in order to speed up delivery on long overdue items. Indeed, lack of
availability had become an increasingly frequent problem and had resulted in a sharp increase in
transportation costs.

Marketing, sponsoring and communication

Luxury goods required significant investments in marketing, sponsoring and media coverage. In order
to bolster its growth Louis Vuitton increased its marketing budget 20% in 2005. Still, advertising
expenses accounted for only about 5% of Louis Vuitton's sales that year. 70% of Louis Vuitton's
advertising spending was aimed at enhancing the overall image of the brand as conveyed by the
highly popular classic products such as the Buckett bag or the Monogram, Epi and Damier leather
goods lines. These marketing investments went to advertising campaigns featuring celebrities – Uma
Thurman in 2005 – and to sponsoring prestigious events, such as the Louis Vuitton and America's
sailing cups or the Louis Vuitton Classic, a very upscale gathering of vintage automobiles.

The remainder of Louis Vuitton’s advertising investment was specifically aimed at supporting new
product introductions. Shoes, designer clothes and accessories, as well as some special leather
goods collections, were primarily seasonal products with a short life cycle, and required a lot of
marketing in order to maximize sales during the first few months, sometimes even weeks, following
their market introduction. For example, with their 2003 winter collection of designer clothes, Louis

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Vuitton introduced a little “week-end purse” called Upton, a Peonia bag for carrying around a camera
and a Bloomington film case. All these products were available in dark colors for men and in white or
pastel shades for women but were only available for a few months. Because of their short life cycle,
such products often needed to be discounted significantly if they were not immediately as successful
as expected. As Louis Vuitton never organized sales or price promotions, unsold articles (7% of all
seasonal products) were offered 70% below their list price to LVMH staff; products that could not be
sold through this channel ended up being disposed of.

In addition to traditional marketing, Louis Vuitton spent about €8 million to fight the illegal imitation of
its products. Counterfeiting was indeed a critical and growing concern. It was estimated that in the
early 21st century, the market bought as many fake Louis Vuitton bags as it did genuine ones.

Yves Carcelle’s dilemma

Because LVMH was so dependent on Louis Vuitton for its own profitability, Yves Carcelle was feeling
a lot of pressure from corporate headquarters. He knew he had to increase, or at the very least

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maintain, the high profit level Louis Vuitton had enjoyed over the past few years. With air traffic down
post 9/11, the Sras crisis and avian flue still lingering on in Asia and a lot of uncertainty about the

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future of the global economy, he knew it would not be an easy task. Yves Carcelle was particularly
concerned with the issue over which the vice president for sales and marketing and the vice president

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for manufacturing and logistics, had been disagreeing for the last few months. He felt that the
intertwined problems affecting product availability, new product introductions and escalating logistics
costs could seriously affect Louis Vuitton’s growth and profitability.

On the one hand, product availability was down, there was no doubt about that. This was sometimes
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good news, when a product was so successful that it was impossible for the company to meet
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demand. In 2004, a new bag in the Monogram collection, designed by Japanese artiste Takashi
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Murakami, had created such a frenzy and was generating so much interest that customers had to sign
up on a waiting list to eventually be able to purchase one. All too often though, customers were not
able to purchase the item they wanted because the store was out of their size, out of the color they
wanted or out of a particular model.

It had been estimated that, on average, out of a total of 100 customers who intended to make a
purchase in a Louis Vuitton store, 8 found that the item they had wanted to buy was not available.
10% of these dissatisfied customers ended up buying a different item from the shop immediately; 20%
postponed their purchase and returned at a later date. The others either turned to other luxury brands
(about 40% of dissatisfied customers) or went for a totally different gift idea than what they had
originally intended; in both cases, the sale was forever lost for Louis Vuitton. In Tokyo's recently
opened store, those lines that most suffered from availability problems were newly-introduced,
fashion-related products. Stores faced even greater shortages during the holiday shopping season;
sales during the second week of December were almost always below expectations, not because of
lower than anticipated demand, but because of too numerous out-of-stock problems. According to
Mrs. Osakei, manager of the new Tokyo store: “One out of every 5 customers that steps in to buy a
new, fashion product, cannot find what he or she came to buy. With our classic lines, it is only 2 out of
every 100 customers that cannot get what they want. If stores could be supplied much more often, on
the basis of actual sales, rather than on demand forecasts, I am convinced we would be able to satisfy
at least 75% of those customers that we currently disappoint by not holding the item they want, and
who walk out without making a purchase”. Yves Carcelle was also concerned that these availability
problems might have a negative impact on how customers perceived service in Louis Vuitton stores.

In order to address the problem, stores were increasingly placing larger orders for those goods they
believed would be in high demand. This only confounded the problem. For one, it moved the problem
back one step to the logistics center and to manufacturing. With tight production capacity, plants were
not able to respond adequately, unless they curtailed production of other product lines. Also, it was
creating problems within the stores themselves. Given the limited space available for storage in the
stores, larger orders for some products led to displacing others and, at best, resulted in moving the
availability problem around; in most cases, it ended up making matters worse because new products
with uncertain demand were displacing more classic items for which demand was very stable.

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In addition to these shortage issues, Louis Vuitton was facing rapidly increasing logistics costs. Freight
costs had risen steeply over the past couple of years because when out-of-stock problems became
too critical at a particular store, goods were flown to distant destinations as an emergency response.
Storage costs were also rising because inventories tended to grow, in particular with retail outlets
expanding the amount of store space allocated to inventory (20% of store space on average).

Merchandising consultants had recommended that Louis Vuitton stores convert some of their current
storage space into more shopping area, in order to make better use of the overall store space
available. This was predicted to allow for a 3% increase in sales, keeping store surface constant, and
provided there were enough demand.

The Cergy Pontoise logistics center had also seen the volume of inventory increase by an estimated
20%. By 2005, goods spent an average of 4.5 months in warehousing along the supply chain, with
some references lying around in storage for 6 months or more. Finally, manufacturing costs were also
on the rise with outsourcing and overtime becoming more widespread.

While the VP for marketing and sales and several other managers in the marketing team had

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suggested generalizing airfreight to all distant destinations in order to shorten delivery times, better
stick to demand and be much more responsive in terms of store replenishment, the VP for

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manufacturing and logistics had responded that such a decision would double the company’s logistics
costs and erode its profitability significantly. Yves Carcelle wasn’t quite sure what he should make of

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all of this, but knew he had to make a decision fast in order to solve the problems Louis Vuitton
appeared to be having with its supply chain.
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A ppendix #1 : LVMH brands and lines of business

Wines & Spirits Fashion & Leather Perfumes & Watches & Selective
goods Cosmetics Jewellery Retailing

Moët & Chandon Louis Vuitton Dior TAG Heuer DFS

Dom Pérignon Céline Givenchy Dior Miami

cruiseline

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Mercier Loewe Guerlain Ebel Séphora

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Veuve Clicquot Kenzo Kenzo Zenith Le Bon
Ponsardin Marché

Canard Duchêne Givenchy Hard Candy Omas Solstice

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Pommery
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Krug Christian Dior Fresh Chaumet La

Samaritaine

Chandon Estates Christian Lacroix Bliss Fred

Cloudy Bay Marc Jacobs Urban Decay

Cape Mentelle Berluti Make Up For Ever

Newton Fendi BeneFit Cosmetics

Mount Adam Thomas Pink

Hennessy Emilio Pucci

Hine Donna Karan

Château d’Iquem

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 608-011-1

Appendix #2: Financial data on LVMH

LVMH Consolidated Profit 2005 2004 2003

Operating profit (€ million) 2743 2372 2182

Operating margin (%) 20 19 18

Net profit (€ million) 1 440 1 194 723

Sales by Business Line (€ million) 2005 2004 2003

Wine and Spirits 2 644 2 259 2 116

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Fashion and Leather Goods 4 812 4 366 4 149

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Perfumes and Cosmetics 2 285 2 128 2 181

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Watches and Jewelry 573 493 502

Selective Retailing 3 648 3 276 3 039

Other Businesses (52) (41) (25)

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Total 13 910 12 481 11 962

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Operating Profit by Business Line (€ million) 2005 2004 2003

Wine and Spirits 869 813 796

Fashion and Leather Goods 1 467 1 309 1 311

Perfumes and Cosmetics 173 150 178

Watches and Jewelry 38 7 (48)

Selective Retailing 347 238 106

Other Businesses (151) (145) (161)

Total 2 743 2 372 2 182

Source : 2005 annual report

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Air Freight
Sea/Surface Freight

1 week
Length

11
3 weeks
Appendix #3 : Transportation alternatives

Appendix #4: Sample products of Louis Vuitton

Cost

€300 / ton

€1500 / ton
608-011-1

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Louis Vuitton Appendix #5 : Louis Vuitton’s Global Presence 608-011-1

CERGY
6
1
1

Many retail outlets n Number of manufacturing facilities

Few retail outlets Logistics center (Cergy-Pontoise

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