Analyzing financial STATEMENTS: Christian Dior (2007)

Résumé du document

In a short span of time, the Christian Dior group achieved its main objective: to make LVMH the world leader of the luxury industry. This accomplishment was achieved despite the risks of the prevailing economic situation. Thanks to a rigorous financial management and the purchases made by some of the very famous and recognized brands of the industry, the Christian Dior group knew how to manage its growth and its brand image. The strategic development of the brands encompasses multiple aspects from the voluntarily selective distribution to the irreproachable product developments. Christian Dior remains a leader in the world of fashion for more than 50 years. It was founded in 1945 by Christian Dior and Pierre Allemand. The first objective was to create a high couture house. Christian Dior made the fashion revolution after the Second World War and imposed its style and the new vision of women. The company revived the notion of luxury after a long dismal period marked by the Second World War. We will try to analyze the financial statements of the group. In the first part, we will present the group, its history, its organization and its activities. In the second part, we will present an analysis of the luxury industry, the main actors and the most important facet of 2007 which impacted the sector. Finally, we will analyze the financial statements of the Christian Dior group.

Extraits

[...] Chairman and CEO Bernard Arnault and family control Christian Dior. Organization chart of the Group Activities Christian Dior is a holding operating around 7 activity segments: Fashion and leather goods (Louis Vuitton, Celine, Givenchy, Kenzo, Berluti, Pucci, Donna Karan and Fendi) Selective retailing (Sephora, DFS, Miami Cruiseline and Le Bon Marché) Wines and Spirits Champagne (Moët & Chandon, Mercier, Veuve Clicquot, etc.) which is the number one Wines (Cape Mentelle, Château D'Yquem, etc.) Cognacs (principaly Hennessy which is the number one) Whisky (notably Glenmorangie) Perfumes and cosmetics Perfumes (Christian Dior, Guerlain, Loewe, Kenzo, etc.) Make up (Make Up For Ever, Guerlain, Acqua di Parma, etc.) Watches and Jewelry (Dior watches, TAG Heuer, Chaumet, Zenith, etc.) Christian Dior Couture Others Reference: www.dior-finance.com Reference: www.dior-finance.com Industry overview Provides an Industry Overview including the main competitors. [...]

[...] In others words, it means that the short term solvency of Christian Dior group decreased. But the figure stays positive and demonstrates that the firm can pay its current liabilities when they are due Current Ratio This ratio, which provides us an indication of the liquidity, compares the amount of current assets to current liabilities. This figure depends also on the industry. We can see in our case that the current ratio is high and proves the existence of extra assets Acid Test / Quick Ratio The acid test gives us an indication about the liquidity position of the group. [...]

[...] At the end of the year 2007, it was one of the only ones that was not touched by the financial crisis, the market volatility and also by the decrease in demand. But in spite of its extraordinary results and its confidence in 2007, some events in 2008 affected the luxury industry and also the financial markets which devaluated LVMH's stock by 20%. The American demand showed also that the end of 2008 would be very difficult to conclude with success. [...]

[...] One of the main actors is Clarins. These companies are smaller in size and are competitive to Christian Dior only in a specific segment (example Clarins is a competitor in the Cosmetics segment) The niche groups are also not all that diversified but optimize their portfolio management thanks to very famous brands. More often those brands are situated at a high range and the market is more limited. These companies do not want to extend their activity areas and are competitive to Christian Dior only in specific segments (example, Swatch group is a competitor in the Watches segment) The mono-brand companies have a real know-how, an important and rich historical background and are often family groups Competition As we have seen before, the luxury sector is highly subjected to competition. [...]

[...] The strategic development of the brands passes by multiple aspects from the voluntarily selective distribution to the irreproachable product developments. We will try to analyze the financial statements of the group. In the first part, I will present the group, its history, its organization and its activities. In the second part, I will present to you an analysis of the luxury industry, the main actors and the most important facts of 2007 which impacted on the sector. Finally, I will analyze the financial statements of Christian Dior group. [...]