Jewelry performed better than other luxury products during the pandemic, but Tiffany may still outperform the global jewelry market.
Photograph:
carlo allegri / Reuters
Tiffany TIF 0.02%
& Co. executives will be happy with the final obstacle to the jeweler’s difficult union with LVMH LVMUY 0.29%
Moët Hennessy Louis Vuitton has been removed. The French buyer may be more concerned with how to make the expensive deal worthwhile.
On Wednesday, Tiffany’s shareholders gave their approval for a small discount under the terms of the original merger. The jewelry store now has a tag price of $ 15.8 billion, compared to $ 16.2 billion. It is still a good result for investors who at one time feared that the business could fail. They profit from a 33% premium on the stock’s value before news of negotiations between the two sides first leaked in October 2019, although the pandemic has reduced the brand’s revenue.
After the deal was closed in early January, five top Tiffany executives will receive gold parachutes worth a total of $ 100 million in total, and LVMH will begin a renovation.
Jewelry performed better than other luxury products during the pandemic. Global sales will fall 15% in 2020 compared to last year’s levels based on Bain & Company’s estimates. In comparison, state-of-the-art watches and clothing will fall by twice that rate.
Tiffany may still outperform the global jewelry market. The company’s sales fell a quarter in the nine months to October. She relies on tourists for a good portion of sales, especially at her store on Fifth Avenue in New York, and her engagement ring business is suffering from the postponement of the couples’ wedding.
The strong demand in mainland China this year suggests that the brand still has a lot of room to grow in Asia. The share of its e-commerce business – now an important focus for luxury companies – has doubled to 12% of the group’s sales compared to last year. And Tiffany has only one-sixth of its European-based stores, giving it the option to expand if and when tourist spending recovers in the region.
LVMH has a good track record of bringing jewelry brands to the market. When it bought Bulgari in 2011, the Italian brand had an operating margin of just 8%. In 2018, that number almost tripled to 25%, according to Jefferies’ estimates. Now that the drama of this merger is over, the work needed to polish Tiffany can begin.
Write to Carol Ryan at [email protected]
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Published December 31, 2020, print edition as ‘LVMH and Tiffany to end the fusion drama with a short honeymoon.’