"Numbered Days for Chanel and Armani?"
From Barron's Penta:
A challenging market for luxury goods could lead to a sustained period of mergers and acquisitions.
Bernstein analyst Mario Ortelli claims smaller, family-controlled
brands like Italian clothing designer Giorgio Armani and Swiss
watchmaker Audemars Piguet are struggling when compared to their larger
counterparts, both of which Ortelli has placed on his list of more than
fifty luxury takeover targets. Among them: Designers Chanel, Versace and
Ermenegildo Zegna; handbag maker Longchamp; jewelry purveyors Chopard
and Graff Diamonds; and watchmakers Rolex, Patek Philippe and Audemars
Piguet.
Of course that’s Ortelli’s take – the cachet and virtue of Audemars
Piguet and Patek Philippe to many watch collectors is precisely that
they are not cogs inside a conglomerate, but maintain their originality
and quality by remaining independent. They also have huge reserves of
their own: The antique watch collection of Patek Philippe is, for
example, alone worth hundreds of millions of dollars, perhaps even more,
and huge premiums would have to be paid to buy either of these
family-owned companies.
So, we have trouble believing stalwart luxury brands like Audemars
Piguet and Patek Philippe are likely to sell any time soon. But we could
see cash-flush lux conglomerates snapping-up second tier or
up-and-coming start-up brands at fairer prices, such as Corum,
Breitling, MB&F and Urwerk. Here management missteps or generational
transition could set up a buying opportunity.
- Chanel Boy Bag Red
After many rich years, such privately-held brands are starting to
have a hard go of it. They “cannot stretch the brand,” Ortelli says,
because they “have to maintain that allure and exclusivity.” But then
again, to be taken seriously, they “have to be in markets like China,
where subdued demand [recently] makes the market more challenging.” The
large conglomerates like Richemont, LVMH, Kering or Swatch Group, can
weather the short-term storm by spreading their costs over several
brands, and, long term, can afford the time it takes to turn around a
troubled label....MORE
