Tuesday, 8 February 2011

LVMH carving out its territory at Hermès

Could Hermès International one day possibly collaborate peacefully with its most rivalling competitor LVMH Louis Vuitton Moët Hennessy - personified by CEO Bernard Arnault? After fighting out the circumstances of the equity swaps - which resulted in LVMH owning 20.2% shares of the family-owned company publicly, one may doubt so. Despite Bernard Arnault's previous assertions that LVMH's intentions were "peaceful" and of "friendly nature", he recently added in a press conference, that he does not intend to remain a passive shareholder in the company.

Currently, French market regulation is still examining the exact circumstances of the equity swap, which did not only arouse numerous questions within the hereditary family of Hermès but also rose the question of stricter regulations within the French market.
As a consequence to the rather surprising intrusion, the founding family has recently created a holding company, which will enable the family to pool the approximately 70% of shares which remain in its possession and hinder further purchases by external stakeholders.

Despite delivering a more than solid performance in 2010, the LVMH share fell on 4th February after LVMH failed to exceed analysts' expectations. Profits from recurring operations rose by 29% percent to 4.32 billion euros in 2010. The revenue of Louis Vuitton brand drove the profit, with its raised prices and new product lines like the "Monogram Empreinte" collection. LVMH is surely relying on China's growing appetite for luxury within the next years.

The year ahead will surely give direction to the "battle" between Hermès and LVMH and their nip-and-tuck-race in consumer favour.


Source: www.bloomberg.com, www.businessweek.com
Picture Source: www.be.com

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