LVMH owns fashion houses Louis Vuitton and Loewe, as well as champagne manufacturer Moët. Photo: PATRICK T. FALLON/AFP via Getty Images
Two aging French billionaires lead the global luxury market: Bernard Arnault and Francois Pinault.
Arnaud, 74, is the second richest man in the world with a personal fortune of around $218bn (£170.5bn) and runs an empire. this includes Louis Vuitton luggage, Tiffany diamonds and Moët champagne at LVMH.
Pino, 86, controls Gucci, Balenciaga, Yves Saint Laurent, Alexander McQueen and through his own conglomerate Kering.
The couple spent their lives building kingdoms that helped establish Paris as the world's capital of luxury. Both men are preparing to pass on their legacy to the next generation, with both LVMH and Kering likely to remain under family control.
However, the couple is suddenly faced with an unexpected challenge: the first truly American luxury group.
New York-based Tapestry — owner of Coach and Kate Spade bags — announced $8.5 billion Thursday (£6.7 billion) deal to buy Capri Holdings, the parent company of Jimmy Choo, Michael Kors and Versace.
The deal, spearheaded by Tapestry CEO Joanne Crevoiser, turns the company into a major force in the industry with weight to compete with Europe.
Crevoiser, formerly of Abercrombie & Fitch's COO joined Tapestry in 2019, shortly after its share price tumbled on disappointing sales.
She helped stabilize the situation, but is now betting heavily on the Capri deal.
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Luxury goods magnate Bernard Arnault is the second richest man in the world. Photo: Heathcliff O'Malley
Crevoisera, who also sits on the board of General Motors and has worked at WalMart, said the takeover would create «a powerful new global luxury home», suggesting ambitions to compete with Europe's biggest names.
And yet a stake in Tapestry fell almost 16% after the debt-financed deal was announced amid fears of a slowdown in home sales.
“Given declining luxury spending in their primary US market, the combined Tapestry/Capri will need to focus on international expansion to achieve significant revenue growth in the near future,” said Jonathan De Mello, founder and CEO of consulting firm JDM. Retail.
«This could really mean fighting LVMH and Kering in their own backyards.»
Capri sales fell 9.6% in the quarter to July 1, according to this week. Meanwhile, rival Ralph Lauren said that revenue in North America fell by 10%, indicating a decline in the industry as a whole.
The slowdown comes after several years of booming sales. According to Bain & in 2022, luxury sales reached €345bn (£298bn). Company. The market is projected to be worth €570bn (£491bn) by 2030. The fact that Bain gives its estimates in euros speaks volumes. year.
However, this amount is negligible compared to European competitors. In 2022, LVMH's turnover exceeded 79.2 billion euros (68.5 billion pounds).
Meanwhile, Kering, which also owns Yves Saint Laurent, reported sales of €20.3bn (£18bn) in 2022. The company recently signed a record deal to open a new Yves Saint Laurent store on London's Bond Street, agreeing to pay 13m for a six-story home. Last month, LVMH and Kering acquired a 30% stake in Italian fashion house Valentino for €1.7bn (£1.47bn).
In addition to sheer size, prestige and reputation are on the side of LVMH and Kering.
“The Arno family is steeped in luxury,” says Neil Saunders, managing director of Globaldata Retail. “They really have a very deep understanding of the business. If you look at them and don't realize that this is a family treated as a management pack, you will say that you have a really good board.”
Saunders argues that many of Tapestry's brands are simply not upscale enough to compete with those owned by LVMH and Kering. A Coach bag costs about £450, compared to more than £1,400 for a Louis Vuitton bag.
“[The Tapestry and Capri brands] were almost like the most expensive mass market segment,” says Saunders, “at the time like many European houses, although they have some mass-market brands, they are much more attractive.” a kind of sophisticated luxury, real luxury brands that operate at a very high level.”
Retail consultant Andrew Busby said: «It's a bit like Corvette trying to compete with Ferrari.»
< p>«Despite the fact that Capri has great brands like Jimmy Choo, Versace, etc …they're pretty niche.
«Look at some of the LVMH brands and they've been around for so long and they just have a different appeal to people.
«In my opinion, [ company] owned by Americans will never be able to compete.”
Instead of fearing the competition, Paris may see the Tapestry deal as simply an acknowledgment of her massive success.
High-End Louis Vuitton bags regularly sell for thousands of pounds more than Coach bags
Saunders says: “I think it has more to do with Tapestry wanting to emulate what [LVMH and Kering] do in terms of their business model, which is to have a house of brands that are a little bit different. address different segments and manage them centrally. so you're cutting costs and expanding.
«It's almost like a form of flattery.»
He thinks these are more affordable brands in the US like Ralph Lauren and Tory. Burch should be most concerned about increased competition from Tapestry due to its new scale.
«Looking more specifically at the affordable luxury market, Tapestry and Capri is creating a player that dwarfs the largely independent and largely private European colleagues. adds Luka Solka, Senior Global Luxury Analyst at Bernstein. «I don't expect any significant impact on the global high-end luxury industry.»
In any case, Crevoiserat hopes that bringing the Tapestry and Capri brands together under one roof will help boost sales, even if the US market is losing momentum .
“Asia is probably the main growth area,” says Saunders. “Travel is resuming, people are returning to offices. Therefore, they buy more clothes and goods for these purposes.”
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