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LVMH Calls Off Tiffany & Co. Deal

9/9/2020
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LVMH made a huge leap in its presence in the luxury jewellery segment by announcing in November 2019 it was going to acquire the world’s second-largest jewellery company Tiffany & Co. for USD16.2 billion. LVMH was looking to build further momentum on the back of upbeat revenue performance in 2018 and the first half of 2019.

Among all luxury segments, jewellery was one of the fastest-growing globally (at 7% annually in 2018), hence generating much interest. Moreover, with the acquisition of Tiffany &Co., LVMH would have consolidated its position in the US market and would be aiming for a more balanced geographic portfolio, after concerns were raised over the reliance of the luxury conglomerate upon China, Asia and France.

For Tiffany & Co., being part of LVMH would have brought the financial muscle and vision needed to appeal to younger consumers, after years of ailing profits suggesting the jeweller has been struggling to appeal to this demographic. However, things have turned somewhat sour between both LVMH and Tiffany & Co. as negotiations on the deal have stalled owing to a few issues and are looking increasingly likely that the deal will grind to a halt.

LVMH has in the last few weeks received a letter from the French government asking them to delay on closing the deal until January 2021 in an effort to dissuade Washington, DC from imposing tariffs on goods from France.

Such an acquisition on the back of coronavirus (COVID-19) has also become somewhat stale. Along with overall sales of luxury goods, personal accessories ranks among the hardest hit FMCG industries. Categories such as luxury bags, luggage, jewellery, watches and writing instruments are expected to close 2020 with double-digit declines given the non-essential nature of most of these goods.

With many consumers facing economic constraints and having few places to wear fine jewellery amid lockdowns and other restrictions, total jewellery sales are expected to decline by 17.7% in 2020. While jewellery sales are facing constraints from store closures and consumers’ prioritisation of essential goods over more discretionary items. Indeed, with many churches closed and large gatherings banned, consumers are postponing their weddings and the subsequent fine jewellery purchases that go with them until next year at the earliest.

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