Titans and Tiffany's
On Jan. 7, 2021, LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods conglomerate and owner of brands including Louis Vuitton, Givenchy and beauty retailer Sephora, announced the completion of their acquisition of New York City-based jewelry retailer Tiffany & Co.
LVMH first agreed to buy Tiffany & Co. at $135 per share in November 2019, but due to a dispute caused by the COVID-19 pandemic, the takeover price was discounted 2.5% and set at $131.5 per share. Tiffany has been suffering greatly as a result of the pandemic and tariffs. LVMH had initially stated that they could not complete the deal with Tiffany “as it stands” because of a request from the French government on Aug. 31 to delay the deal beyond Jan. 6, 2021 due to the possibility of tariffs being imposed by the United States government. After much speculation about whether the merger would happen amidst a turbulent economy, the acquisition was finalized for a total of $15.8 billion, the largest deal ever in the luxury sector.
Tiffany & Co. is an iconic retailer mentioned in various pop culture works from Audrey Hepburn’s 1961 film “Breakfast at Tiffany’s” to a lyric in the Eagles’ 1974 song “Hotel California” (“Her mind is Tiffany-twisted”). The acquisition of such a distinctly American brand allows French-based LVMH to significantly bolster its presence in the U.S.
Prior to adding Tiffany & Co. to their portfolio, LVMH’s watch and jewelry subsidiaries consisted entirely of European brands; watches and jewelry are also the corporation’s smallest subsidiaries. LVMH has long been recognized as a major player in the soft luxury market — designer clothing, leather bags and accessories — as a result of their ownership of numerous renowned and elite fashion houses. However, in the hard luxury market of watches and jewelry, LVMH was significantly less-established; Italian brand Bulgari, was one of the few names recognizable to Americans out of the six brands in their hard luxury division. Hard luxury sales only account for nearly 9% of LVMH’s sales and the merger has the potential to bolster their profitability. With so much speculation and publicity surrounding this historic deal, Tiffany & Co. has rapidly established itself as an LVMH brand, and the newly-created association consolidates the corporation’s position as a force to be reckoned with in the hard luxury sector.
Even before the pandemic, Tiffany & Co. was in “turnaround mode.” While the jeweler’s historic past — starting with its founding in 1837 — remained esteemed, it had lost its charm with the younger generation. Following plunging sales and a bleak business plan, CEO Frederic Cumenal resigned in early 2017 and was replaced with Alessandro Bogliolo, whose leadership has proven beneficial for Tiffany. With a fresh image in mind for the future of Tiffany and the goal of appealing to millennials, in particular, Bogliolo devised a new strategy that would resonate with their target audience. In their first TV ad in 20 years, the retailer ran a spot during Super Bowl LI featuring American singer Lady Gaga as one of the new faces of the brand. Additionally, Tiffany shifted the focus from engagement rings and wedding bands to jewelry marking milestone events, an appropriate decision considering millennials generally prioritize their careers over marriage and are therefore waiting longer to get married on average. The business was steady until the pandemic forced the lockdowns on malls and boutiques, leading to international travel flatlining, and causing Tiffany & Co.’s revenue to plunge 45% from the previous year, amounting to $65 million in losses. In a comment about the acquisition, LVMH CEO and French billionaire Bernard Arnault said that Tiffany would “thrive for centuries to come” as part of his diverse portfolio. However, with plummeting interest in luxury goods amidst the global pandemic, social-distancing lockdowns and a sharp decline in travel, it remains uncertain whether LVMH will recoup the billions spent acquiring Tiffany & Co.
Photo Credit: Pixabay
Photo Caption: Earlier this month, LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods conglomerate, completed their acquisition of iconic New York City-based jewelry retailer Tiffany & Co.