Skip to main content
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

The Big Luxury Houses Have $22 Billion to Invest

LVMH, Kering, Richemont and Hermès are flush with cash. Where should they invest it?
Source: Shutterstock
By
  • Bloomberg

PARIS, France — For Europe's luxury giants, it's a nice dilemma to have: what to do with all that cash.

French companies LVMH, Kering and Hermès International, along with Switzerland's Richemont, had collectively amassed a €17.4-billion ($21.5 billion) cash pile by the end of 2017. More is rolling in, as sales boom in China and a new generation of designers creates buzz with younger shoppers. Just this week LVMH reported that first-quarter organic sales surged a greater-than-expected 13 percent.

“They can’t park this cash; they have to do something with it," said Ashok Som, co-director of a luxury management program run by France’s Essec Business School and Italy’s SDA Bocconi School of Management. Something — but what?

Hermès is paying a special dividend to shareholders totalling about €528 million, while Richemont is spending about €2.7 billion to take control of online retailer Yoox Net-a-Porter SpA. Yet those transactions will make relatively small dents in the companies’ cash piles.

ADVERTISEMENT

Splashing out on acquisitions is an option, but not many attractive targets are available. The big luxury groups would love to get their hands on closely held Chanel, for example, but its owners show no interest in selling. LVMH was firmly rebuffed when it tried to mount a stealth takeover of Hermès. Over the past year, the big groups passed on chances to acquire watchmaker Breitling, shoe company Jimmy Choo Group Ltd. and Jeanne Lanvin SAS, France's oldest couture house.

Outside-the-box acquisitions haven't worked well. Kering, the owner of Gucci and Saint Laurent, tried to marry luxury with sports by buying sneaker maker Puma and skateboarding brand Volcom a few years ago. It's now getting rid of both.

There are still plenty of takeover opportunities among smaller luxury companies. Global number one LVMH, though, already owns some 70 luxury brands. Adding another shoemaker or watchmaker wouldn’t move the needle much — especially since LVMH gets about half its profits from its star Louis Vuitton brand.

There are a couple of potential targets lurking out there that would soak up a lot of cash.

British trench-coat maker Burberry Group Plc, with a market value of about £7.1 billion ($10.1 billion) has been the subject of recurrent takeover speculation as it relaunches under a new designer and chief executive — speculation fuelled in part by a growing stake held by Bernard Arnault's friend and business associate, the Belgian billionaire Albert Frere.

And US jewellery retailer Tiffany & Co., with a market value of about $12 billion, could attract a takeover offer from European companies, analysts at Citigroup Inc. wrote in December.

By: Carol Matlack and Robert Williams

Related Articles:

Who Will LVMH and Kering Buy Next?Opens in new window ]

LVMH Posts Sales Surge in Boost to Luxury SectorOpens in new window ]

© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Luxury
How rapid change is reshaping the tradition-soaked luxury sector in Europe and beyond.

Marine Serre: From Radical to Pragmatist

Serre, who grew sales by 20 percent in 2023, has been named Pitti Uomo’s next guest designer. She’s using the opportunity to show her men’s collection for the first time.


view more

Subscribe to the BoF Daily Digest

The essential daily round-up of fashion news, analysis, and breaking news alerts.

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
BoF Professional - How to Turn Data Into Meaningful Customer Connections
© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions, Privacy Policy, Cookie Policy and Accessibility Statement.
BoF Professional - How to Turn Data Into Meaningful Customer Connections