This year, luxury companies were more likely to try to get out of contracts than to sign new ones. That could soon change as money picks up on the balance sheets of the biggest players, while independent brands come under the pressure of investing.
It is easy to see that contracts were being made in the region at the time of the pandemic. This month came to an exception: Italian clothing brand Moncler announced a link with Stone Island in a trade that valued the smallest streetwear competitor at € 1.2 billion, or $ 1.4 billion at current exchange rates. Furthermore, the 2020 tone was set by LVMH Moët Hennessy Louis Vuitton’s legal push to get out of his $ 16 billion pre-pandemic bid for U.S. jeweler Tiffany & Co., which was settled out of nowhere. court with a small price discount.
Management teams were too busy cutting costs and scrambling to sell online at the time of locks to consider the attraction that comes with buying a brand new one. Companies like Burberry that investors have traditionally seen as targets that could stay on the shelf despite a sharp valuation fall. Based on its share price, the British trench coat maker could pick up at one point in March for half of what it was ordering in January.
Soon, however, the biggest luxury brands will be against their old legacy of what should be done with the heaps of money they generate. By the end of next year, the top five European players will have a total net cash of around € 3 billion by market value, based on FactSet estimates. While Hermès, the maker of the Birkin handbag, is happy to keep billions of euros sitting on his books, more proprietary names like LVMH and its competitor Kering, which owns the Gucci brand, may consider contracts to replace them.
Even after Tiffany’s demise, LVMH will have a moderate net debt of earnings about one hour before interest, taxes, depreciation and depreciation. It has been relevant in the wake of previous declines. The French company became interested in a family-owned Hermès in 2010 but eventually failed to take over. He bought the Bulgarian Italian jeweler out of private ownership in 2011.