Making sense of LVMH’s conquest of the very few profitable Italian private luxury brands

Less than a week after being dealt a blow of the French stock exchange regulatory authority – AMF, which fined LVMH 10 million euros over its alleged fraudulent manner of amassing up to 21% shares in rival Hermes, its owner/Chairman/CEO, Bernard Arnault (actively involved in all companies of the group) made a 2 billion euro, an impossible-to-refuse offer to Loro Piana family, for the house of Loro Piana considered ‘the Hermes of Italy’ and one of the very few profitable Italian privately owned luxury houses.

Loro Piana will provide LVMH access to a target consumer which is not addressed by any of its existing luxury fashion houses – generations who have grown up with the brand, which has always been inherently associated with performance, innovation and the ultimate level of craftsmanship. Unlike many of the other Italian brands owned by LVMH such as Emilio Pucci or Fendi, Loro Piana commands a most sophisticated luxury lifestyle positioning, one which is deeply rooted in the DNA of the brand (for instance, when announcing a new collection or a new store opening, providing its customers with a sketch).

However, the most important value Hermes and Loro Piana share is CONSISTENCY. Unlike the majority of LVMH fashion brands - Dior, Givenchy or Fendi which have always been dependant on the Creative Director, few of the Hermes or Loro Piana are aware whether or who is the Creative Director / Designer of the house. Consistency has also been translating into a steadily growing financial performance, despite the economic crisis of the past 5 years. The two brands have been sporting consistency also in terms of product development – neither Hermes, nor Loro Piana have been facing the huge dilemma of the past two years whether to features less of their logo on a product or to adapt its products to a certain market.

Loro Piana will also provide LVMH fashion companies access to its unique textiles – perfect timing for Berluti (formerly a shoe-maker, turned fashion and accessories brand by Bernard Arnault son), not to mention, the hotel development obsession of Bernard Arnault, for which Loro Piana can provide the most luxurious fabrics and accessories.

It remains to be seen whether Arnault, considered one or all of the strategic business arguments above. Personally, I believe, Loro Piana was just a matter of ego. Have Emilio Pucci, Givenchy, Celine or Kenzo (all LVMH wholly brands, bought more than 10 years ago) reached the performances of Dior or Vuitton , or will they ever achieve such performances? Even the more recently acquired brands by LVMH, such as Italian jeweller Bvlgari seems to have lost, at least temporarily, not only its positioning. Maybe, the recently announced face of the brand – singer, ex-model and ex-First Lady Carla Bruni will revive the essence of the brand which has always been associated with timeless icons of style, celebrated not only for their beauty but talent Sophia Loren, Elisabeth Taylor or Gina Lolobrigida.

Considering that some of the few family owned and run business such as Max Mara or Ermenegildo Zegna are not for sale – at any price – Italian media has sensibly pointed today that Arnault’s the remaining ’prays’ in Italy may be Tod’s or Salvatore Ferragamo. I doubt Tod’s will ever be of interest to Arnault, especially because of the ‘attached’ and much smaller brands within the group. Indeed, Ferragamo may be an ideal ‘candidate’, as it could use the ‘corporatization’ of LVMH, especially due to the disagreements within the many Ferragamo family members who are involved in the company (a similar situation drove Brioni into the arms of François-Henri Pinault (Kering Group) – some with hotels, some with fashion, some with fashion…

But wouldn’t even mention Armani? Or maybe the most profitable part of the company, beauty, has already been sold to giant L’Oreal, which has been licensing Armani fragrances, make up, cosmetics for over 2 decades.

I cannot help but wonder whether Bernard Arnault ‘checked on’ Loro Piana the way he did 4 years ago, when I bumped into him in Las Vegas, at the Bellagio Hotel shopping gallery ’fraudulently’ sneaking into a recently closed Hermes store – which relocated the same day to the Crystals Mall, but some furnishings were still there…

UPDATE 16 July, 2013

Antoine Arnault, son of LVMH owner is named CEO of Loro Piana. He is also the CEO of Berluti.

Oliver Petcu

Ferragamo shoes factory