BusinessOct 29, 2020
Tiffany Co. and LVMH’s nightmare engagement — from happily engaged to court room battles and now back to “happily” married
Upscale Acquisition
Victor Lei
Discover
Marrying for money doesn’t often end up well but Tiffany and LVMH learned that the hard way. Tiffany and LVMH go from happily engaged, to courtroom battles in under a year and now they’re looking to work things out.
Back in Nov. 2019, LVMH, the owner of luxury brands including Louis Vuitton, Fendi and Celine, agreed to acquire Tiffany & Co. — the US jewelry retailer.
The honeymoon period ended shortly after a global pandemic sent Tiffany’s sales down nearly 50%. In Sept. 2020, LVMH walked away from the deal and Tiffany sued back.
And now, the two are in talks again to smooth out their problems — by lowering the purchase price. LVMH initially agreed to a price of $135/share but the two are now looking at a price of $131.5.
But hey, what’s a couple dollars right? ~$420m in savings for LVMH, that’s the difference, according to Financial Times.
Fashion capitals: Paris, Rome and Milan were hit hard during the beginning of COVID — where Chinese tourists accounted for two-thirds of European luxury sales. However, stronger than expected Chinese demand and a focus on online channels became a bright spot in the luxury sector.
The traditional thought was that luxury needed the lavish in-store customer experience but e-commerce is proving that wrong.
Money talks… A strong rebound in luxury sales during the third quarter may have changed LVMH’s mind.
Competitors, Hermès and Kering, reported third-quarter earnings in Oct. that exceeded analysts’ expectations and signaled a recovery in the sector. Hermès reported a 7% third-quarter sales growth — compared to a 41% drop in the second quarter.
Tiffany won’t be reporting third-quarter earnings until December but it expects to report sales to show a significant recovery — with sales down less than 10% from the same time last year.
Tiffany investors, breathe a sigh of relief. The new price tag may not be the best outcome but it’s still more than a 45% increase from where Tiffany’s stock was trading before the acquisition. It’s a much better outcome than being stuck in an expensive legal battle with one of the largest luxury retailers in Europe.
