Feb. 5 (Bloomberg) -- LVMH Moet Hennessy Louis Vuitton SA, the largest luxury-goods maker, missed analysts’ profit estimates and slashed its budget for new stores, calling the economy the worst since the Great Depression.

Net income dropped 4.2 percent to 1.14 billion euros ($1.5 billion) in the six months ended in December, pulled down by flagging liquor sales, Paris-based LVMH said today. That trailed the 1.19 billion-euro median estimate of seven analysts surveyed by Bloomberg and was the first decline in six-month earnings since the first half of 2002.

LVMH plans to reduce capital investment by as much as 15 percent this year. The company won’t cut advertising expenses or discount Louis Vuitton products even as the financial crisis crimps demand for the most expensive luxury goods.

“We need to plan for the worst and hope for the best,” Chairman Bernard Arnault said at a presentation in Paris after the report today. He wouldn’t give any forecasts and said he wasn’t sure the crisis would end this year.

LVMH and rivals including Salvatore Ferragamo SpA are scaling back ambitions after announcing a wave of planned store openings in recent years as consumers pull back, eroding sales in the 175 billion-euro luxury-goods market.

“They are going to focus on key markets and key products,” said John Guy, an analyst with MF Global Securities in London in a telephone interview after the report. Guy has a “neutral” rating on the stock and a 54-euro target price.

Full-Year Figures

Second-half sales rose 3.5 percent to 9.39 billion euros, more than the 9.32 billion-euro median estimate. Arnault said he expects LVMH to gain market share and emerge “stronger” from the global recession. Lower share prices could offer opportunities for acquisitions, he said, without elaborating.

Full-year net income was unchanged at 2.03 billion euros, while sales rose 4 percent to 17.2 billion euros. Net income had risen 7 and 12 percent in the first half of 2008 and second half of 2007, respectively.

Sales at LVMH’s largest division, fashion and leather goods, climbed 7 percent, helped by Vuitton’s Damier Graphite handbags. Revenue at the No. 2 unit, wines and spirits, fell 3 percent. Perfume sales added 5 percent, watches and jewelry sales rose 6 percent and revenue at the selective retailing unit, which includes Sephora and DFS, rose 5 percent.

The figures were released after French stock trading ended. LVMH fell 67 cents, or 1.49 percent, to 44.40 euros in Paris. The shares have lost 7.1 percent since the beginning of the year, compared with a 7.9 percent drop by the Bloomberg European Fashion Index, and slid 42 percent in 2008, the most since at least 1990.

Bulgari, Richemont

Bulgari SpA, the world’s third-largest jeweler, last week reported a 10 percent drop in fourth-quarter revenue. Cie. Financiere Richemont SA, the maker of Vacherin Constantin and Cartier watches, on Jan. 19 said third-quarter sales declined 7.2 percent, missing analysts’ estimates.

“Everybody is suffering and things are difficult for LVMH as well,” Dennis Weber, an analyst with Dresdner Kleinwort in London, said before the report. “However, they are pretty strong in all segments of the luxury market, and they may be gaining a bit of market share.” He rates LVMH “buy.”

Chief Operating Officer Antonio Belloni said the company will continue to invest in Louis Vuitton, Sephora and Duty Free Shops. The level of investment may be reviewed in the second half of the year, he said.

Belloni said he plans to add about 100 Sephora stores this year, bringing the total up to more than 1,000.

LVMH expects to introduce new products this year from Louis Vuitton, Guerlain and Dior Parfums.

Louis Vuitton had “double-digit” sales growth excluding exchange-rate effects in the fourth quarter, according to Yves Carcelle, director of the fashion and leather goods division. Carcelle attributed Vuitton’s performance to “tremendous” growth in sales to customers in mainland China, who have become the brand’s No. 2 clientele.

To contact the reporters on this story: Sara Gay Forden in Milan at sforden@bloomberg.net; Ladka Bauerova in Paris at lbauerova@bloomberg.net.

Last Updated: February 5, 2009 15:51 EST