FRENCH CAT FIGHT
Or what happens when the richest cat in France sets sights on the house of Hermès.
ACQUISITION KING
Respect to Bernard Arnault.
Without a doubt, this CEO of LVMH is THE acquisition king in the luxury world.
He's taken over 60 luxury brands under the LVMH umbrella over the past two decades including Moet & Chandon, Dom Pérignon, Louis Vuitton and the jewel in his crown, Italian jeweler Bvlgari.
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| Acquisition King Bernard Arnault, CEO of LVMH |
RECESSION-PROOF HERMES
Arnault can’t be faulted for his Hermès obsession.
After all, Hermès is the only luxury brand that’s actually growing despite recession, while LVMH stock under-performed DESPITE flagship Louis Vuitton.
Anyone who has lusted after the Birkin or the Kelly gets this, right?
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| Hoards of Asian tourists line up at Hermès, Paris every day |
FAMILY AFFAIR
The house of Hermès is one of the last major family-run independent luxury brands in France with no intention to change that dynamic.
If you talk
to Axel Dumas, CEO and sixth gen member of the Hermès family, it’s this
very protective family culture that has stood the test of time.
With 175% growth in stock price over the past 5 years and 740 million euros net profit in 2012 under the reign of Patrick Thomas, exceeding or even maintaining Hermès’ current growth rate means Dumas sure has his work cut out for him.
With 175% growth in stock price over the past 5 years and 740 million euros net profit in 2012 under the reign of Patrick Thomas, exceeding or even maintaining Hermès’ current growth rate means Dumas sure has his work cut out for him.
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| Forbes interview following Dumas' appointment as Hermès CEO |
WHO WINS THE WAR?
A truce has been called. LVMH must distribute its 23.2% stake among its shareholders. AND it can't buy shares for the next 5 years. Arnault stands to benefit from 3 billion euros and Hermès gets to keep its ownership in-house.
Broadly, this is a victory for luxury as the Hermès business model is the very essence of the luxury industry.
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| Axel Dumas on the rooftop of the flagship Rue du Fauborg St Honore store |
LVMH’s strategy is quite progressive i.e. growth via expansion and acquisition. Hermès in contrast has always been more conservative, with its focus on heritage, craftsmanship, building value over time and through quality. Even when it couldn't meet market demand for the Kelly, Hermès did not expand production which is not feasible for any public listed company.
Sources:
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