Jewelry has performed better than other luxury goods during the pandemic, but Tiffany could still outperform the global jewelry market.
Photo:
carlo allegri / Reuters
Tiffany TIF 0.02%
The executives of Co. & Co. will be glad that the final obstacle to the fall union of the jeweler with LVMH LVMUY 0.29%
Moët Hennessy Louis Vuitton has been eliminated. The French buyer may be more concerned with how to make the expensive deal pay off.
On Wednesday, Tiffany’s shareholders approved a slight discount on the original merger terms. The jeweler now has a sticker price of $ 15.8 billion, below $ 16.2 billion. It is still a good result for investors who at one point feared the deal could collapse. They are charged with a 33% premium on the value of the shares before news of talks between the two parties first leaked in October 2019, although the pandemic has reduced the brand’s revenue.
After closing the deal in early January, five top Tiffany executives will receive a $ 100 million gold parachute in total, and LVMH will begin a review.
Jewelry has performed better than other luxury goods during the pandemic. Global sales will fall 15% in 2020 compared to last year’s levels, according to Bain & Company estimates. In comparison, watches and high-end clothing will slow to twice that rate.
Tiffany could still perform lower in the global jewelry market. The company’s sales fell a quarter during the nine months to October. He relies on tourists to get a lot of sales, especially on his flagship Fifth Avenue in New York, and his engagement ring-related business is suffering as couples delay marriage.
Strong demand in mainland China this year suggests the brand still has plenty of room to grow in Asia. The share of its e-commerce business, which is now a major focus for luxury companies, has doubled to 12% of the group’s sales compared to last year’s level. And Tiffany only has a sixth of its stores in Europe, which gives it the option to expand if tourist spending recovers in the region and when.
LVMH has a good track record when it comes to acquiring luxury jewelry brands. When it bought Bulgari in 2011, the Italian brand only had an operating margin of 8%. By 2018, that number had tripled to about 25 percent, according to Jefferies estimates. Now that the drama of this fusion is over, the work needed to polish Tiffany can begin.
Write to Carol Ryan to [email protected]
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It appeared in the December 31, 2020 print edition as “LVMH and Tiffany To End Merger Drama With a Short Honeymoon.”