LVMH Moët Hennessy Louis Vuitton is the world's largest luxury goods company, with brands that are bywords for the good life and everything showy. LVMH makes wines and spirits (Dom Pérignon, Moët & Chandon, Veuve Clicquot, and Hennessy), perfumes (Christian Dior, Guerlain, and Givenchy), cosmetics (Bliss, Fresh, and BeneFit), fashion and leather goods (Donna Karan, Givenchy, Kenzo, and Louis Vuitton), and watches and jewelry (TAG Heuer, Ebel, Chaumet, and Bulgari). LVMH's selective retail division includes Sephora cosmetics stores, Le Bon Marché Paris department stores, and 61% of DFS Group (duty-free shops). Chairman Bernard Arnault and his family, through Groupe Arnault, own about 47% of LVMH.
With the market for luxury goods on a tear -- especially in fast-growing markets in Asia -- LVMH is flush with cash for acquisitions. Putting that cash to use, in late 2011 the French luxury goods firm completed a €3.7 billion ($5 billion) tender offer for the shares of Rome-based jeweler Bulgari. Bulgari is the smallest of the major luxury jewelry and watch makers and the deal doubles LVMH's watch and jewelry business. The Bulgari deal was announced soon after LVMH acquired a pair of niche brands: Ole Henriksen and Nude skin care. In late 2010, LVMH bought more than 20% of the shares of its rival Hermes International. While LVMH described the move as friendly and said it would not launch a takeover bid for Hermes, it nevertheless led to speculation regarding further consolidation in the luxury goods industry as LVMH is known for its predatory nature.
LVMH's Louis Vuitton unit continued the acquisition streak, purchasing Swiss timepiece maker La Fabrique du Temps in mid-2011. La Fabrique has been Louis Vuitton's manufacturing partner since 2007; the deal helps the luxury leather goods firm to lessen its dependence on external suppliers -- similar to moves made by competitors. Additionally, LVMH in late 2011 acquired 100% of the shares of ArteCad, a top maker of Swiss watch dials. (Shortly before the acquisition, PPR took control of Sowind Group, another Swiss watchmaker.)
The rebound in luxury goods sales comes after a turbulent 2009 for LVMH, during which revenue dipped about 1% overall and profit fell more than 7% vs. 2008. LVMH adopted a cautious approach in 2010, given the ongoing financial uncertainty caused by the financial crisis in Greece, concern about the fiscal health of other countries in Europe, and up-and-down stock market in the US. Still, it continued to invest in promising markets such as Brazil, China, the Middle East (Qatar and Bahrain), and Russia (it owns a majority stake of Russian retailer Ile de Beauté). China is a huge emerging market for luxury goods and a pillar of growth for the French company. To that end, LVMH opened two stores there in 2010 timed to coincide with the Shanghai World Expo.
The company has been focusing on controlling as much of its distribution as possible. LVMH has more than 2,400 retail outlets (about 85% are outside France). Nearly half are fashion and leather goods stores, led by Louis Vuitton, and also including Fendi boutiques, and hundreds of other shops under the Celine, Givenchy, Donna Karan, Thomas Pink, Pucci, and Marc Jacobs brands, among others. LVMH'S namesake Louis Vuitton brand, as well as Fendi and Marc Jacobs, are proving resilient in Europe, despite the economic slowdown there, and posting strong revenue gains in Asia.
Striking out in a new direction, the luxury goods firm is venturing into the hotel business via a partnership with Egypt's Orascom Development Holding. Together the two plan to develop upmarket resorts in Egypt and Oman, with LVMH overseeing the design and running of the hotels, which are slated to open in 2012. With LVMH investing no capital in the hotel venture (it will be paid a management fee), the deal could prove less risky than its 2008 purchase of Dutch yacht maker Royal van Lent and the financial newspaper Les Echos. – less
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