A French Company Acquires Another Prestigious Italian Jewelry Brand

Tilda Swinton, a spokesperson for Pomellato.

Less than two years after French conglomerate LVMH acquired luxury Italian jewelry brand Bulgari; its French competitor, holding company Kering, finalized its acquisition of Italian jewelry brand Pomellato.

The agreement for Kering to purchase a majority stake in Pomellato was announced in April. On Thursday, Kering, formerly known as PPR, announced in a brief statement that the agreement received clearance from the antitrust authorities and has been finalized.

Pomellato was one of the few truly prestigious independent Italian jewelry brands left to acquire. The brand was founded by Pino Rabolini in Milan in 1967, pioneering the concept of ready-to-wear jewelry. The idea was that jewelry is not just a status symbol but an accessory to be worn and replaced at any time of the day. The current CEO, Andrea Morante, will remain in this position with the company.

Pomellato ranks among the top five European jewelers by sales, with 2012 revenues of €146 million ($190 million). It has a distinct style, an international following and an aura of exclusivity. The brand is known for its colorful rounded cabochon gems and its tactile forms. For example, pavé patterns are created with gemstones of various sizes and irregular forms. In recent years, the company was also known for its advertising partnership with actress Tilda Swinton, who appeared in company photographs and videos.

In 1995, Pomellato launched a second brand, Dodo, an accessible line of 18k gold charms in the shapes of animals. The name, after an extinct bird, was chosen as a way to exemplify the need to protect nature. The brand supports the Italian World Wildlife Fund, working to prevent the extinction of other animal species.

Pomellato’s distribution network includes 86 mono-brand stores (45 Pomellato, 41 Dodo) as well as approximately 600 independent points of sale around the world. More importantly for Pomellato and Kering is that there is plenty of room for growth. Pomellato has expressed an interest to extend its international distribution. Kering, with its immense size as an international player in the apparel and accessories markets, can fuel that growth.

Kering is present in more than 120 countries and generated revenues of €9.7 billion ($12.4 billion) in 2012. With the acquisition Pomellato finalized, the company now has a majority stake in 19 brands that include international luxury fashion brands Gucci, Bottega Veneta and Saint Laurent; French luxury jewelry brand, Boucheron; Chinese luxury jewelry brand, Qeelin; luxury Swiss watch brands, Girard-Perregaux and Jewn-Richard; and sports brand, Puma.

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Stéphane Linder to Become CEO at Tag Heuer

Stéphane Linder

Luxury holding group, LVMH Moët Hennessy Louis Vuitton, has named Stéphane Linder as the new chief executive officer of Swiss luxury brand Tag Heuer. The appointment will take effect June 1.

Linder, who is currently vice president of sales in North America for Tag Heuer, will replace Jean-Christophe Babin who was recently named CEO of Bulgari, also owned by LVMH. Babin replaces Michael Burke who LVMH appointed as head of Louis Vuitton.

Linder began his career with Tag Heuer in 1993 in the R&D Department, and held the positions of Product and Trade Marketing manager, R&D and Brand director, and VP of Marketing and Product Design before taking up his current position in 2010. 

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Baselworld’s ‘Opening Act’

Baselworld representatives at opening day press conference.

BASEL, Switzerland — Baselworld, the premiere event of the Swiss watch industry, on Wednesday unveiled the latest renovation to the multi-building complex that it calls home. The $454.5-million upgrade reflects the spectacular success of an industry that has defied the trials and tribulations of the worldwide economy and a product that has remained popular despite changing fashion and trends. It also is a response to an industry now dominated by a few luxury conglomerates.

The eight-day watch and jewelry fair actually opens Thursday. Wednesday was press day, where top officials discussed the tradeshow and the industry in general. The discussion of the new design was described as Baselworld’s “opening act” by Sylvie Ritter, managing director of the tradeshow.

While several buildings underwent dramatic change under the leadership of architects Herzog & de Meuron, most eyes are focused on Hall 1, now rebranded as the “Global Hall.” It is the main area for some of the most world-renowned watch and jewelry brands. This year, the area not only underwent dramatic structural change, but occupants changed as well. Several brands (mostly independent) were moved to other areas of the complex. Now brands represented by global conglomerates Swatch Group and LVMH far outnumber independent brands. These include Hublot, Tag Heuer, Breguet and Bulgari.

Independent brands that remain in Hall 1 include Patek Philippe, Rolex, and Ulysse Nardin.

René Kamm, CEO of MCH Group, which operates the Basel fairgrounds (Messe Basel), explained that the redesigned hall is reserved for “watch and jewelry brands that have a global impact and a worldwide reach.”

Speakers put on a unified front and spent a great of deal of time thanking exhibitors. However, change this dramatic does not come easy and several exhibitors who have lost their space in Hall 1 were not happy (although refusing to voice their displeasure publicly).

All of this change also came at a price. Several brand executives told me (or refused to dispute) that exhibiting in Hall 1—which includes the construction of multi-story, elaborate temporary showrooms that also have been upgraded this year—now costs upwards of $5 million.

Jacques J. Duchêne, president of the Baselworld Exhibitors’ Committee, said it is the domination of luxury conglomerates that has led to the changes at Baselworld.

“In the course of the past 15 years, the watch and jewelry industry has been through a consolidation process on a scale never witnessed before, and this has also had its effects on the challenges faced by production and marketing, which have changed radically,” Duchêne said. “Now it is a good thing to take note of changes and to adjust to them, but it is even better still to anticipate needs and to be in a position to satisfy them without delay when they arise.”

The price hike and the pressure to create more elaborate booths were also felt among exhibitors who don’t have the deep pockets of the brands in Hall 1. A few companies actually pulled out of the show. Perhaps seeing an opportunity, Hong Kong-based tradeshow and publishing company, UBM Asia, will open its first tradeshow in the European market next year in nearby Freiburg, Germany, with dates that overlap Baselworld.

 

The international press at the opening of Baselworld

But even though some are a bit disgruntled, the 1,460 companies from 40 countries exhibiting recognize the importance of being there in terms of sheer numbers, glamour and international attention. Many brands will bring international celebrities along to help present their new products. More than 3,500 journalists from 70 countries will be covering the event and approximately 100,000 people will attend.

The show is also buoyed by the amazing success of the Swiss watch industry. In 2012, the industry has produced another record year with exports totaling 21.4 billion Swiss francs ($22.6 billion), a 10.9 percent increase over 2011.

“Today, it is thanks to this excellent state of health of the industry that we are able to present the show to you in its attractive new look,” Duchêne said. 

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LVMH Watch and Jewelry Revenue Down 1%

LVMH Moët Hennessy Louis Vuitton, said Monday that first quarter revenue for its Watches and Jewelry division fell 1 percent to 624 million euros ($815.6 million) due to cautious buying by multi-brand retailers. It was the only business division in the luxury goods conglomerate to show a decline in revenue for the period. In organic terms (with comparable structure and constant exchange rates), revenue grew 2 percent.

TAG Heuer’s first quarter was marked by the 50th anniversary of its Carrera line and the new partnership with McLaren which was announced at the Geneva Motor Show. Hublot and Zenith also had a good start to the year. In jewelry, Bulgari “recorded strong revenue growth in its own stores,” largely based on the success of its Serpenti line.

Other brands in the division are Hublot, Zenith, Chaumet, Fred and De Beers Diamond Jewellers.

LVMH said total revenue for the 2013 fiscal year increased 6 percent to 6.94 billion euros ($9.07 billion). Organic revenue growth was 7 percent compared to the same period in 2012, which saw a sharp rise.

The Paris-based conglomerate—whose brands also include Moët Chandon, Louis Vuitton, Dior and Sephora—said it saw “strong growth” in Asia and the United States, while Europe “demonstrates good resistance despite a challenging economic environment.”

First quarter results in its other business division are as follows:

The Wines & Spirits division recorded a revenue rise of 6 percent. Champagne sales were “notably robust” in Asia, which compensated for softer demand in Europe. Hennessy cognac had a “solid performance” in the United States and “rapid growth” in China.

The Fashion & Leather Goods division was nearly flat year-over (0.4%) Louis Vuitton “continued its progress,” the company said. Fendi “benefited from continued developments in fur and leather and pursues” and Céline “made excellent progress” in its own stores.

Perfumes & Cosmetics division experienced a 5 percent increase for the period. Christian Dior recorded “solid growth” due to the “vitality of its perfumes and, in particular, the continued strength of J’adore, Miss Dior and Dior Homme. The new lipstick Dior Addict and the premium skincare Prestige also contributed to the brand’s growth. Guerlain continued to benefit from the strong momentum of La Petite Robe Noire and the success of its high-end skincare Orchidée Impériale,” the company said.

In the Selective Retailing division showed a 16 percent increase for the period. DFS had an “excellent performance driven by the continued growth in Asian tourism.” Sephora gained market share in all its regions as it continues to expand its global store network. Online sales also experienced “rapid growth.”

“In an economic environment which remains uncertain in Europe, LVMH will continue to focus its efforts on developing its brands, will maintain a strict control over costs and will target its investments on the quality, the excellence and the innovation of its products and their distribution,” the company said. 


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Richemont Expects Huge Sales and Profits as Hard Luxuries Continue to Sparkle

Montblanc boutique in Hamburg. Photo credit: Anthony DeMarco

A luxury slowdown in China, a European economy under constant crisis, and sluggish growth in the U.S. has failed to slow the growth in the sale of “hard luxuries” (jewelry and watches). The latest example is Geneva-based Compagnie Financière Richemont, which issued a statement Monday saying that it expects first half profits to rise from 20 percent to 40 percent, year-over-year.

Richemont—whose brands include Cartier, Van Cleef & Arpels, Montblanc and Vacheron Constantin—was required to make this statement prior to its sales and profits reports for the first half of the year. SIX Swiss Exchange requires that issuers make an immediate announcement when “the foreseeable profit or loss for a given period is expected to deviate significantly from the profit or loss achieved in the prior-year period.”

In accordance with these requirements Richemont said that sales for the four months ended in July rose 24 percent on a reported basis and 13 percent on a constant-exchange basis. Based on these results, Richemont’s said its operating profit for the six months ending September 30 is likely to show an increase of between 20 percent and 40 percent compared to the first six months of the last financial year.  Net profit for the same period may also increase by 20 percent and 40 percent.

Richemont sales for the five months ending August 31 will be announced on September 5 first-half results for period ending September 30 will be announced November 9.

This is the latest in financial reports that are revealing the resiliency and strength in hard luxuries.

* In late July, Paris-based LVMH reported revenue growth of 26 percent, year-over-year to $16 billion for the first half of 2012. Group profit rose 28 percent to $2 billion. The luxury group, whose jewelry and watch brands include Tag Heuer, Hublot and Bulgari, acquired in June 2011, reported that total jewelry and watch sales rose 113 percent to $1.6 billion, with Bulgari's revenue now included. Organic growth was 13 percent.

* A few days earlier, Swatch Group, the world’s largest watch company, said its watch and jewelry sales for the first half of 2012 increased 16.7 percent to $3.42 billion, year-over-year. The company owns 19 watch and jewelry brands in all market segments, including Swatch, Breguet and Longines.

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De Beers Diamond Sales Up 27%, Cautious Outlook

The De Beers Group said Friday that total sales increased 26 percent year-over-year to $7.4 billion. Sales of rough diamonds by the Diamond Trading Company, the company’s the rough diamond sales and distribution arm, increased 27 percent for the year to $6.5 billion—the second highest level of sales for the diamond giant. Diamond prices for 2011 rose 29 percent as diamond production fell 5 percent to 31.3 million carats, compared with 2010.

EBITDA for the year increased 21 percent to $1.7 billion with third party debt reduced to $1.3 billion, compared with $1.8 billion in 2010.

De Beers described 2011 as “a year of two halves.” The first “saw exceptional consumer demand growth which, when coupled with lower than historical levels of global diamond production, resulted in very strong polished and rough diamond price growth,” the South African-based company said. “Rough diamond prices in this period included an element of speculative buying in the trading centers.”

However, in the second half of the year demand fell as “both retail and cutting center sentiment was impacted by the challenging macro-economic environment, restricted liquidity (particularly in dollars) in the cutting centers and a slowdown in the rate of growth of consumer demand at retail,” the company said.

De Beers Diamond Jewellers, a diamond jewelry retail venture with LVMH, reported “good growth” in sales across all regions, with greater China particularly strong. “The China opportunity is a priority for De Beers, with further 2012 expansion plans following the opening of stores in Beijing, Tianjin, Dalian and a second Hong Kong store in 2011,” the company said.

De Beers Forevermark diamond brand continued its expansion as it entered India and the U.S. during the second half of the year.  Forevermark is now available in 658 retail doors across nine markets, an increase of 89 percent compared with 2010.

In its outlook, De Beers said that despite economic uncertainty and “barring a global economic shock,” it expects “to see continued growth in global diamond jewelry sales, albeit at lower levels than the exceptional 2011 growth,” driven by luxury goods sales, improving sentiment in the US (the largest diamond jewelry market), continued growth in China, and “the positive impact of the 2011 polished price growth on retail jewelry prices.”

On the production side, the company said it does not expect an increase in diamond carat production in 2012 and that it will “ramp-up profitable carat production as Sightholder demand dictates. In the medium to longer term, the industry fundamentals remain positive with consumer demand, fueled by the emerging markets of China and India, outpacing what will likely be level carat production.”

This should be the last time in the 80-plus-year history of De Beers that it will file an annual report under the ownership of the Oppenheimer family. On November 4, 2011, the family agreed to sell its 40 percent interest of De Beers to its main partner, Anglo American, for $5.1 billion in cash. The transaction is expected to close during the second half of 2012.

On Wednesday, De Beers named Gareth Mostyn as its new CFO and board member.

Bulgari Boosts LVMH Jewelry and Watch Sales

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, reported that jewelry and watch sales in 2011 grew by 98 percent, year-over-year, due to the acquisition of Bulagri and a 41 percent increase on a comparable structure basis.

“The agreement with the Bulgari family was one of the key moments of the year,” said Bernard Arnault, LVMH chairman and CEO.

Organic growth (which doesn’t include the Bulgari acquisition, the structural changes or currency fluctuations) totaled a more realistic but still extremely strong 23 percent increase for the period. In fact, in terms of percentage, it was still the best performer for the Paris-based luxury conglomerate.

Jewelry and watch sales for the year totaled 1.95 billion euros ($2.56 billion) driven by strong demand across all geographical regions and product lines.

TAG Heuer successfully launched two products entirely developed and manufactured by its own workshop: the Mikrograph 100 and the Mikrotimer Flying 1000, LVMH said. Hublot continued its innovations with the launch of Masterpieces, the new watch collection of Grandes Complications, and extended its store network. Zenith benefited from the renewal of its emblematic lines. Bulgari reported “excellent” results, the company said. Jewelry brands Chaumet, De Beers and Fred, continued to develop their star collections.

The jewelry and watch division was among all categories of products that led to a successful year for LVMH, which owns luxury brands in fashion and leather goods, wine and spirits, perfumes and cosmetics, and Internet retailing. Louis Vuitton, in particular recorded double-digit revenue growth during the year.

LVMH reported a 16 percent increase in total revenue reaching 23.66 billion euros ($31.07 billion) in 2011. Profit from recurring operations increased by 22 percent to 5.26 billion euros ($7 billion), “a performance which is even more remarkable when compared to the strong growth recorded in 2010,” the company said.

In its outlook, the company said it expects an “excellent” 2012.

“After an exceptional 2011, and despite an uncertain economic environment in Europe, LVMH is well-equipped to continue its growth momentum across all business groups in 2012.”

Jewelry and Watch Sales Sparkle for LVMH

LVMH Moët Hennessy Louis Vuitton, the world’s leading high quality products group, said revenue for the first nine months of 2011 rose 15 percent year-over-year to 16.3 billion euros ($22.3 billion). Organic revenue growth was 15 percent after the currency impact was compensated by the June 30 consolidation of Italian luxury jeweler, Bulgari, into the LVMH structure.

The third quarter continued the trend of strong growth evident since the start of the year, the Paris-based conglomerate said. The momentum continued in Asia, Europe and the United States, while Japan returned to growth over the period. In its outlook, the company said it expects the same revenue growth to continue till the end of the year.

The Watches & Jewelry division (which includes the brands TAG Heuer, Zenith and Hublot), while fifth among the company’s six business units in overall income, was the strongest performer for the nine-month period, recording a 76 percent revenue increase (26 percent organic growth) to 1.2 billion euros ($1.7 billion). The third quarter was marked by the public offer for the outstanding minority shares in Bulgari, which the company said, is performing well across all product categories. TAG Heuer enhanced its feminine product offering with a new jewelry extension to its Formula 1 line and has expanded its presence in Asia. Hublot continues the successful roll-out of the Classic Fusion collection. Driven by the excellent progress of its El Primero and Captain ranges, Zenith continues to demonstrate the strong appeal of its high quality chronographs. The other jewelry brands, Chaumet, Fred and De Beers continued their positive momentum through their own store network, the company said.

Results for its other businesses during the nine month-period are as follows:

Revenue for the Wines & Spirits group (which includes Moët & Chandon, Dom Pérignon, and Jas Hennessy & Co.) increased 7 percent (11% organic) to 2.3 billion euros ($3.2 billion), led by champagne and premium alcohol sales.

Fashion & Leather Goods group (which includes Louis Vuitton, Thomas Pink and Marc Jacobs) grew 13 percent (15% organic) to 6.2 billion euros ($8.5 billion).

Perfumes & Cosmetics group (Christian Dior, Guerlain and Parfums Givenchy) saw its sales rise 3 percent (10% organic) to $2.3 billion euros ($3.2 billion)for the period, led by the sustained growth of its flagship product lines.

Selective Retailing group (which includes DFS, Sephora and La Samaritaine) sales increased 18 percent (19% organic) to $4.3 billion ($5.9 billion), benefiting from the expansion of Asian tourism, which was particularly strong in Hong Kong and Macao.

Its businesses listed as “other activities,” recorded a slight loss.

LVMH Watch and Jewelry Sales Up 30%

LVMH’s watches and jewelry business group benefited from sustained demand across all regions during the first half of 2011. Reported sales rose 30 percent to 576 million euros ($831 million). Organic revenue, when currency fluctuations and other nonrecurring events are removed, grew by 27 percent. It was the Paris-based luxury conglomerate’s top performer in terms of sales growth among its six business divisions.

Profit from recurring operations for the business group rose by a staggering 73 percent to 85 million euros ($122.6 million) for the first half of 2011.

By region, watch and jewelry sales for the period increased 52 percent in Asia, 29 percent in Europe, 28 percent in the U.S. and 8 percent in Japan. This business group is made up of Swiss luxury watch brands, Tag Heuer, Zenith and Hublot; Parisian timepiece and pen designer, Dior Montres; Parisian luxury jewelry houses FRED, Chaumet; and De Beers Jewellery (the diamond jewelry retail arm of the mining giant, which operates in a joint agreement with LVMH).

LVMH said TAG Heuer revenue grew significantly due to its automatic chronograph made with the 1887 caliber movement, a new women’s range of the Formula 1 line of timepieces, and the selective opening of TAG Heuer stores. At Hublot, the latest models from the King Power line were delivered with new Unico movements made by its manufacture. Zenith confirmed the strong demand of its new collections. Dior launched with “extraordinary success” the Dior VIII watch. Chaumet, FRED and De Beers all achieved good performances in their own store networks.

The watches and jewelry division makes up about 5.6 percent of LVMH’s total sales, but that is about to change soon as it absorbs Bulgari into its company. LVMH bought a 76.1 percent controlling stake in the Italian jewelry house in March and it is in the process of finalizing the transaction.

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, divides its business into the following groups: Wine & Spirits, Fashion & Leather Goods, Perfume & Cosmetics, Watches & Jewelry, Selective Retailing and Other Activities. It’s brands from its divisions (other than jewelry and watches) include Moët & Chandon, Louis Vuitton, Guerlain, Sephora and Groupe Les Echos media group.

LVMH’s total revenue for the first half of 2010 was 10.3 billion euros ($14.8 billion), an increase of 13 percent. Organic revenue growth was 15 percent. All business groups contributed to this performance, “which is even more remarkable coming on top of the strong growth in the first half of 2010,” the company said. Sustained growth was reported in the U.S., Europe and Asia, despite the uncertain economic conditions.

Profit from recurring operations for the period, ended June 30, rose to 2.2 billion euros ($3.2 billion), an increase of 22 percent compared to the same period in 2010. Current operating margin reached 22 percent, an improvement on the first half of 2010. Group share of net profit increased 25 percent to 1 3 billion euros ($1.8 billion).

“LVMH’s excellent performance in the first half, once again, demonstrates the exceptional appeal of our brands, the attraction of our high quality artisanal products and the pertinence of our strategy,” said Bernard Arnault, LVMH chairman and CEO. “We approach the second half of the year with confidence and are relying upon the creativity and quality of our products as well as the effectiveness of our teams to pursue further market share gains in our historical markets as well as in high potential emerging markets.”

Devon Pike Named CEO of De Beers Diamond Jewellers U.S.

With the news of the hiring of Philippe Mellier as De Beers CEO on Monday, another high-profile hiring by a division of the diamond giant went a bit under the radar.

De Beers Diamond Jewellers said Monday that Devon Pike has joined the company as chief executive officer of its U.S. business. Pike is a veteran merchandising, marketing and retail executive, who previously served as a senior vice president at Juicy Couture after spending six years at Polo Ralph Lauren.

De Beers Diamond Jewellers was established in 2001 as an independently managed and operated company by LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, and De Beers SA, the world’s premier diamond mining and marketing company.

“She (Pike) is a highly respected retail industry executive, who understands how to develop and expand sought-after brands,” said Francois Delage, De Beers Diamond Jewellers CEO. “The US market is strategic for us and the recruitment of Devon is a sign of our commitment to further developing our activities in one of the world’s largest jewelry markets.”

Before joining De Beers, Pike was SVP of Digital at Juicy Couture, where she had been since May 2009. She previously held the position of SVP GMM for Juicy Couture’s North America and Travel Retail business.

Prior to Juicy Couture, she spent six years at Polo Ralph Lauren, where she held roles managing global business development, and as VP, General Merchandise manager of the Rugby Ralph Lauren brand. Pike joined Polo after holding a series of positions of increasing responsibility first at May Department Stores and subsequently Federated Department Stores. She is a graduate of Brown University and Harvard Business School.

Bulgari Jewelry Sales Up 29.3%

The Bulgari Group said Tuesday that first quarter 2011 sales increased 27.5 percent, year-over-year to 253.8 million euros ($394 million) led by strong demand for all of its products throughout the world, particularly in China.

“The general recovery of the economic context, together with an extremely competitive offer in all product categories, very impactful communication initiatives and a constant improvement of the shopping experience had a very positive influence on the turnover, with a significant contribution from both the directly owned stores and the wholesale channel,” the Italian luxury jewelry house said in a statement.

The Rome-based company that will soon be under the LVMH umbrella, reported that jewelry sales (the company’s core business) increased by 29.3 percent to 114 million euros ($163.4 million), watch sales rose 22 percent to 50.6 million euros ($72.5 million), accessories sales jumped 19 percent to 20.7 million euros ($29.6 million), and perfume and cosmetic sales soared 33 percent to 60.1 million euros ($86.1 million).

All the geographical areas where the company operates registered very positive sales results. However, it was Asia that led the way. By itself, the continent accounted for nearly half of all sales for the company in the first quarter at 122.3 million euros ($175.3 million), a 33.5 percent increase. Sales in China alone soared 76 percent, year-over-year for the three-month period. Sales in Japan increased 10.5 percent to 39.4 million euros ($56.4 million), despite the prolonged closure of shops following the earthquake and tsunami that hit the country March 11.

While sales growth in the rest world wasn’t as dramatic, it was still robust. In Europe, sales rose 16.5 percent to 79.5 million euros ($114 million), with sales in Italy up 7.8 percent to 25 million euros ($35.8 million). Sales in the Americas increased 20.2 percent to 32.7 million euros ($46.9 million). In the Middle East and other areas where the Rome-based jewelry operates saw a 59.8 percent increase in sales to 19.4 million euros ($27.8 million).

Bulgari is a global player in the luxury market relying on a network of stores in exclusive shopping areas around the world and on selected distributors. There are 294 Bulgari stores in the world of which 177 are directly owned. The company has a product portfolio that ranges from jewels and watches to accessories and perfumes.

LVMH Q1 Watch and Jewelry Sales Up 28%

LVMH Moët Hennessy Louis Vuitton reported that sales for its Watches & Jewelry business rose 28 percent to 261 million euros ($371.2 million) for the first quarter of 2011 supported by the “excellent performance” of its own boutiques and its multi-brand retail stores as well as its recent watch introductions.

The company’s watch-making brands revealed their innovations at Baselworld, the world’s largest watch and jewelry trade fair. TAG Heuer strengthened its iconic Carrera collection of chronographs. Zenith, which performed well for the quarter, continued the renovation of its manufacturing facility in Le Locle, Switzerland. Hublot benefited from the strong momentum of its Big Bang and King Power lines and the opening of its own boutiques, most notably Place Vendôme. Chaumet's new Bee My Love collection “was very well received.” And De Beers made “significant progress” in Asia and the United States.

The company said its acquisition of the Italian luxury jewelry house Bulgari was a key highlight of the quarter.


Jewelry and watches weren’t the only quality performers for the period. Overall, the world's leading luxury goods group reported that first quarter 2011 sales increased 17 percent to 5.24 billion euros ($7.38 billion). All of its business divisions recorded strong growth for the period. The United States, Europe and Asia all recorded positive sales increases.

The Paris-based company said that following the earthquake in Japan, an important market, local teams worked hard to bring a gradual return to normal business.

The Wines & Spirits business group posted a 20 percent increase in sales to 762 million euros ($1.08 billion) boosted by strong demand in the U.S. and Asia.

The Fashion & Leather Goods business, home to the company's most prestigious brand, Louis Vuitton, reported a 17 percent sales increase to 20.3 billion euros ($28.85 billion).

Perfumes & Cosmetics sales increased 9 percent to 803 million euros ($1.14 billion) led by traditional and new products from Christian Dior and Guerlain.

The Selective Retailing business segment sales grew 20 percent for the quarter to 1.4 billion euros ($2.02 billion) due to a rise of tourism in Asia. Sephora chain of cosmetic stores continued to do well across regions, increasing its market share.

LVMH said it will continue to focus its efforts on developing its brands and maintaining control over costs. It said it will rely on “the diversification of its businesses and the good geographical balance of its revenues to increase.”

LVMH Becomes the New Big Kid on the Luxury Jewelry Block

Bernard Arnault

For Bernard Arnault, the “King of Luxury,” the acquisition of Bulgari is somewhat unusual. Not because of the type of company being purchased, but because of what he gave up to acquire the Italian luxury jewelry house.

The deal is going to cost Arnault, LVMH chairman and CEO, more than 3.7 billion euros ($5.2 billion), consisting of approximately 1.9 billion euros in shares to the Bulgari family and about 1.84 billion euros in cash to buy out the other shareholders. In addition, the acquisition will dilute Arnault holdings of LVMH to 46.5 percent, while Bulgari will get a 3.5 percent share of the luxury goods conglomerate and become LVMH’s second largest shareholder. Bulgari will get two seats on the LVMH board, the family will continue to control Bulgari and Bulgari’s chief executive, Francesco Trapani, will lead LVMH enlarged watches and jewelry activities, which includes the brands TAG Heuer, Chaumet, Zenith, Hublot, Fred and De Beers. Philippe Pascal.

What does Arnault get in return? In a single swoop of his pen, LVMH’s jewelry and watch holdings will double (from 5 to 10 percent), enabling LVMH to take on its biggest rivals in the “hard luxury” sector, Switzerland’s Richemont, owners of Cartier, and the Swatch Group. He also gets one of the most famous luxury jewelry brands in the world, known for adorning the most glamorous Hollywood stars (including Elizabeth Taylor) and royalty.

Arnault was quoted as saying that hopefully it will show Hermès (a reluctant target of Arnault) that he is able to work with a family-owned company. However, that may be premature as the working relationship hasn’t yet begun.

Both companies say the deal will create a more efficient distribution system for Bulgari (which has been struggling to make a profit in recent years) and help it to expand its network of stores, particularly in high-growth areas such as China.

The stock markets seem to like the deal, as the LVMH price has risen since the merger. Those in the jewelry industry have raised questions on whether it will create a jewelry company that is less distinguishable from other luxury jewelers.

No matter what happens, one thing is certain, the luxury jewelry sector has a new player.

LVMH to Buy a Controlling Stake in Bulgari

Bernard Arnault

Bernard Arnault has done it again. While no one was watching the chairman and CEO of LVMH Moët Hennessy Louis Vuitton has captured another prize: Bulgari.

In a few hours the two companies will announce that LVMH will purchase a 51 percent share of the Italian luxury jewelry house, according to the Financial Times and other published reports. The purchase will come in the form of a share swap. A person close to the deal told the FT that as part of the deal, Francesco Trapani, Bulgari’s chief executive, will take a senior position in the LVMH group, while Bulgari family members will get board representation.

According to the report the Bulgari family is united in agreement for the sale. This is in contrast with LVMH’s 20-percent position in Hermès, the Parisian luxury house, which is still being talked about in luxury circles. This deal was done in late 2010 through a complex derivatives position without the knowledge of the heirs of the Hermès family, who own 70 percent of the fashion house. The family has publicly voiced its disapproval. 

Update, March 7, 2:35 a.m EST: LVMH just released its announcement of the acquisition with addition information. Upon completion of the share transfer process, LVMH said it will issue 16.5 million shares in exchange for the 152.5 million Bulgari shares currently held by the Bulgari family, who will become the second largest family shareholder of the LVMH Group. In compliance with the Italian Stock Exchange regulations, LVMH said it will submit a Public Purchase Offer at the price of €12.25 per share on the shares held by minority stockholders.

The statement further defines Bulgari executives’ positions in LVMH. Paolo and Nicola Bulgari will remain chairman and vice chairman of the Bulgari S.p.A. Board of Directors, respectively. The Bulgari family will have two representatives on the LVMH Board of Directors. Trapani will join the executive committee of LVMH and will assume, in the second half of 2011, the management of the LVMH enlarged watches and jewelry activities, which includes the brands TAG Heuer, Chaumet, Zenith, Hublot, Fred and De Beers. Philippe Pascal, the current head of jewelry and watch group, will remain on the LVMH executive committee and be given new responsibilities within the Group, the statement said.

“Our entrance into LVMH will allow Bulgari to reinforce its worldwide growth and to realize noteworthy synergies, in particular in the areas of purchasing and distribution,” Trapani said. “Bulgari and these brands will be able to invest and innovate even further to become the world leader in the high end segment.”

Arnault added: “We share the same culture in terms of respect for identity and roots of the brands, quest for excellence, creativity and innovation. As is the case with LVMH, the Bulgari family shareholders are directly involved in managing the company, they are entrepreneurs that know and excel in all aspects of the business, from the creation of the product to after sales service. It is for these reasons that we immediately understood each other and agreed on the way we would work together.”

Tiffany Appoints Frederic Cumenal as Executive VP

Tiffany & Co. said Wednesday it has named Frederic Cumenal as executive vice president effective March 10. He will be responsible for the company's businesses in Asia, Japan, Europe and emerging markets, and will report to Michael J. Kowalski Tiffany chairman and CEO.

Cumenal, 51, joins Tiffany from the LVMH Group where most recently he was president and chief executive officer of Moët & Chandon, S.A. Cumenal will succeed James E. Quinn, whose retirement in early 2012 was previously announced.

"Frederic brings a wealth of luxury brand experience and a highly developed global perspective that will prove especially important as Tiffany's growth continues outside of the Americas," said Mr. Kowalski.

LVMH Watch and Jewelry Sales Up 29% in 2010

LVMH Moët Hennessy Louis Vuitton annual watches and jewelry sales grew by 29 percent in 2010 to 985 million euros ($1.34 billion) and profit from recurring operations doubled. Watch and jewelry brands gained market share across all regions.

For its 150th anniversary, TAG Heuer successfully launched a new watch movement and enhanced its presence in Asia, the company said. Hublot benefited from the growing success of the Big Bang and King Power collections, continued to increase its high-end offering and integrated its workshop of high-end watch making. Zenith found a new strong momentum with its new collections and the El Primero movement. The jewelry brands Chaumet, De Beers and Fred registered solid revenue growth in their European and Asian store networks.

Overall, the world’s leading luxury products group reported a 19 percent increase in revenue in 2010 to 20.3 billion euros ($27.67 billion), exceeding the 20 billion euro mark for the first time. All business groups saw excellent momentum in Europe, Asia and the United States. Louis Vuitton, in particular, once again recorded double-digit revenue growth during the year.

Revenue increased by 20 percent in the fourth quarter with organic growth rising 13 percent, the luxury group said February 4. Profit from recurring operations increased by 29 percent to 4.32 billion euros ($5.88 billion). The current operating margin improved by 1.6 percentage points to reach 21.3 percent in 2010 with all businesses contributing to this performance. Group share of net profit was 3.03 billion euros ($4.12 billion).

“2010 was a great vintage for LVMH,” said Bernard Arnault, LVMH chairman and CEO. “The quality of our products, the originality of our brands and the talent of our teams bolstered by the economic recovery allowed us once again to gain market share throughout the world. In 2011, LVMH intends to further strengthen its global leadership position in high quality products by relying on its sound long term strategy.”

LVMH Now Owns 20% of Hermes

Bernard Arnault

If there are any doubts that Bernard Arnault is interested in a majority stake in Hermes, they have been settled. In a one-sentence statement through his company, LVMH Moët Hennessy Louis Vuitton, the billionaire businessman says he now owns 21,338,675 Hermes shares, just over 20 percent of the family-owned, Parisian luxury goods company.

Paris-based LVMH enraged Hermes family members in October when it revealed it had taken a 17.1 percent stake in the company. Arnault, said at the time LVMH would continue to buy more shares but did not intend to take control, to make a public offer for the company nor to seek seats on the board.

The family shareholders of Hermes called for Arnault to withdraw his Hermes' capital.

AFP reports that LVMH is now the single largest shareholder in Hermes but it is controlled by the descendents of founder Thierry Hermes who between them hold 73.4 percent of the capital.

LVMH, the world's leading luxury group, controls brands such as Louis Vuitton, Givenchy, Dom Perignon and Dior. 

I was first alerted to this story through the Lorre White, The Guru of Luxury, website, so special thanks to Lorre.

LVMH Buys 14% of Hermes

LVMH Moet Hennessy Louis Vuitton, the world's leading luxury products group, said it has bought 14.2 percent of the share capital Hermès International. The luxury good conglomerate now holds a 17.2 percent of the famed fashion house.

Its objective is to be a long-term shareholder of Hermes and to contribute to the preservation of the family and French attributes, “which are at the heart of the global success of this iconic brand,” LVMH said in a statement. The company adds that it has no intention of launching a tender offer, taking control of Hermès or seeking board representation.

According LVMH paid less than half the market price for the shares due to the use of derivatives. The $2 billion cost of the 17.1 percent stake equates to about $112.50 per share, about half of what the company was valued because of the use of derivatives, according to the Financial Times. Following news of the acquisition over the weekend, shares shot up an additional 15 percent.

Hermes said it learned of the move on Saturday, just an hour before a public announcement by LVMH, according to media reports. Heirs of the Hermès family, who own 70 percent of the fashion house, on Sunday said they had no plans to sell any of their stake and had not sold any shares to LVMH.

LVMH Watches and Jewelry Up 29%

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury group, said Thursday that revenue for its Watches & Jewelry business group grew at a record pace of 29 percent in the first nine months of 2010 with many of its iconic brands leading the way. Organic growth, when currency fluctuations were not taken into account, was 22 percent. This business group outperformed all other product categories for the international luxury retail conglomerate.

TAG Heuer, which has been expanding worldwide, has benefited from the new models launched for its 150th anniversary celebration. Hublot gained market share due to the “excellent performance” of its Big Bang and King Power lines, the company said. Zenith’s new collections were “very favorably received.” The jewelry brands Chaumet, Fred and De Beers also reported strong growth.

The company as a whole achieved revenue of €14.2 billion ($20 billion) in the first nine months of 2010, a year-over-year increase of 19 percent, LVMH said. Organic revenue growth was 14 percent for the period. Without releasing exact numbers, the company said Asia, Europe and America performed well.

In addition, all its product categories achieved double-digit growth. The results are as follows:

* Wine & Spirits, 22 percent;
* Fashion & Leather Goods, 20 percent
* Perfumes & Cosmetics, 14 percent
* Selective Retailing, 17 percent

In its outlook, the company said it will continue its focus on “innovation and targeted geographical expansion in the most promising markets.”