France’s LVMH, the world’s biggest luxury group, on Monday reported a 23% profit drop for the first six months of 2009 to €687 million ($977 million).

But the company’s turnover edged up 0.2% from the same time last year to €7.81 billion ($11.1 billion) despite a sharp drop in sales of drinks and jewellery.

Watches and jewelry sector posted 73 percent drop in profit, and wines and spirits sectors fell 41 percent.

LVMH blamed the bad performances on massive destocking in the first half, linked to the “difficult economic environment.”

“Champagne revenue was impacted by the high stock levels at distributors who destocked massively in the first half,” a statement by LVMH said.

The wines and spirits division includes top brands like Dom Perignon. The cognac business, supported by markets in Asia, was more resilient, the group said.

Fashion and leather goods were a bright spot with a 7 percent increase in profit from recurring operations.

The company predicts that it will continue to gain market share even in a shrinking market.

Businessweek has a quote from Bernard Arnault, chairman and CEO of LVMH, shown at right who said that the results were “particularly remarkable given the global economic crisis” and that LVMH is approaching the second half of the year “with confidence.”