By Astrid Wendlandt

PARIS (Reuters) - LVMH boss Bernard Arnault said 'bling, bling' was out, but business was improving for the French luxury group, particularly in spirits, champagne and watches.

The Paris-based luxury giant, which makes Louis Vuitton bags and Hennessy cognac, said on Thursday 4 February it had produced record revenue in December and several of its divisions' lieutenants gave a relatively upbeat trading update.

LVMH defied the luxury industry's worst slump in two decades with a 1 percent rise in like-for-like sales in the fourth quarter and a smaller-than-expected drop in operating profit for 2009.

Arnault said the crisis had led consumers to look for authentic and genuine luxury more than ever, a trend which analysts say tends to benefit strong and well established brands.

"With the crisis, 'bling, bling' is largely passe ... and something which someone should not show off," Arnault said.

Christophe Navarre, head of LVMH's wines and spirits unit, said champagne and particularly prestige vintages, had suffered greatly last year but trends improved in January.

"Stocks are at their optimal level," Navarre said about the group's wines and spirits. "January was good, February will be good, so we will have a good first quarter."

Philippe Pascal, head of LVMH's watches and jewelry division, said orders for the new collections of Hublot and Tag Heuer watches, two of its biggest brands, were higher than expected in January.

"We had an encouraging January," Pascal said.

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Earlier this month, several luxury products retailers including Burberry, Richemont and Swatch published forecast-beating sales for 2009 and produced optimistic trading updates.

The positive news flow led several analysts to upgrade their 2009 and 2010 forecasts for luxury companies, including Hermes, which will report sales on Friday 5 February, and Gucci Group, owned by PPR, whose numbers are due on February 18.

However, LVMH finance director Jean-Jacques Guiony said the group had not yet noticed an improvement in wholesale orders for fashion and leather goods while Pascal said wholesale orders had "practically stopped" for Chaumet jewelry and watches.

Yves Carcelle, chief executive of Louis Vuitton, which contributes roughly half of LVMH's operating profit, said the brand would enter the Dominican Republic, Lebanon and Poland this year and spend money on refurbishing existing shops.

LVMH's profit from recurring operations reached 3.35 billion euros ($4.65 billion) in 2009, down 8 percent from 3.63 billion in 2008, beating an average forecast of 3.24 billion in a Reuters poll of 10 analysts.

On a reported basis, the group's revenue fell 2.4 percent to 5.11 billion euros in the fourth quarter against the same period last year.

Over the year, revenue fell 4 percent on a like-for-like basis.

Asked about acquisitions, Arnault said the group's priority was organic growth. "For M&A, we will see," Arnault said. "Prices are still very high."

As usual, the group did not give an outlook for the current year.

Total net profit for 2009 reached 1.76 billion euros, roughly in line with the Reuters poll forecast of 1.75 billion.

LVMH proposed raising the dividend by 3 percent to 1.65 euros a share for 2009.

LVMH shares have gained nearly 4 percent since the beginning of the year after climbing 64 percent in 2009.

($1=.7207 Euro)

(Editing by James Regan and Richard Chang)