LVMH And Hermes: Is This The Top Of A Luxury Bubble?


Photo: AP

The public spat over upscale retailers LVMH Group’s stake in  Hermes has been heating up.Since 2008, LVMH has accumulated a 20% stake in Hermes, which Chairman Bertrand Puech hasn’t taken to kindly.

Now, LVMH CEO Bernard Artault is reported to be buying more Hermes’s stocks.

Peuch asked LVMH to halve its stake in the company but Arnault is set on being a long-term shareholder. Bloomberg reports:

While LVMH’s investment in Hermes is “peaceful,” the company won’t be a passive shareholder, Gode said, repeating comments made earlier this year by Bernard Arnault, chairman and CEO of the world’s largest luxury goods maker. LVMH is ready to work with Hermes to exchange ideas and know-how, Gode said.

“From the outset we understood that there was no possibility of controlling Hermes because the family shareholders spoke for 70 per cent of the company,” Gode said. “Our sole objective was, and remains, to make a long-term investment in a company with recognised potential and with which we share a passion for high-quality workmanship.”

Hermes which first listed in 1993, saw its stocks surged to over €200 on the Paris stock exchange this week on rumours of further talks with rivals LVMH, and are trading at about €192.50 today. LVMH meanwhile is trading at about €116 today.

Luxury retail brands have been extremely successful of late. Tiffany’s shares were soaring after it reported strong global earnings and raised its outlook last month. Valuations are soaring, too.

Not surprisingly, there’s a growing chorus of sceptics, and when you see one major luxury firm snapping up shares of another, the whole industry definitely begins to feel more bubbly.

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