Tiffany Co. and LVMH’s nightmare engagement — from happily engaged to court room battles and now back to “happily” married – The Average Joe


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    Tiffany Co. and LVMH’s nightmare engagement — from happily engaged to court room battles and now back to “happily” married


    October 29, 2020

    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.

    A look at Tiffany and LVMH’s history

    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.

    COVID got you feeling down? Try some shopping therapy

    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.

    • E-commerce has become a critical sales channel for luxury brands — Hermès’ online sales doubled to 13% of its total sales, more than any of its flagship stores.
    • Chinese demand for luxury is still strong in Asia, whose economic activity has largely recovered. Despite a pandemic, many of the largest luxury brands (Prada, Dior and Gucci) had actually seen sales growth in China.

    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.

    For investors… Tiffany settles for a smaller ring

    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.

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