Fashion powerhouse LVMH is on the prowl
The Short Version
As the fashion industry spends the next month looking at new styles, some of those people sitting on the front row are more interested in a brand’s bottom line more than what’s coming down the runway. Fashion mega holding group LVMH has changed its strategy from buying large, successful brands to smaller, up-and-coming designers that have yet to make it big. The result is making a lot of designers nervous.
A Little More Detail
Louis Vuitton Moet Hennessy (LVMH) is one of fashion’s largest conglomerates. It owns brands you know such as Marc Jacobs, Christian Dior, Kenzo, Fendi, and Givenchy, among several others. They also own a number of high-end wine and spirit brands and a few other things in the luxury category. They’re big, they’re powerful, and they are extremely well financed. They have plenty of money to throw at most anything they want to purchase.
In the past, the LVMH strategy has been to purchase only known brands, fashion labels that were established, well recognized and profitable. The conglomerate would infuse their purchase with enough capital to fuel extensive growth in an effort to make them super brands. For the most part, that strategy has worked.
However, LVMH CEO Bernard Arnault says that the company is changing its purchase strategy. Instead of going for the big brands, they’re looking for smaller labels that address a niche spot in the market. An example would be their purchase of German baggage label Rimowa late last year. Chance are, unless one travels to Europe frequently, one has never heard of Rimowa. Expect that to soon change. That’s exactly the strategy the group is taking toward fashion as well.
If they’re looking at anyone specific, though, they’re keeping their mouths shut about it and that silence has everyone on edge. There are several smaller brands, from Jason Wu to Adam Semalt, showing in New York this week that could be a good fit for the conglomerate’s new strategy. There are plenty of others in London, Milan, and Paris as well. The question is whether the label’s growth pattern is sufficient to warrant their purchase.
Smaller luxury brands have had it tough given the downturn in luxury sales over the past three years. Smaller labels don’t have as many flagship stores, if any, and are more dependent on department stores to fuel sales. Department stores have been sucking air of late with major chains such as Macy’s having to close hundreds of units. As a result, the attraction of big company money is very attractive to those trying to stay afloat.
Already this year, New York-based designer Bibhu Mohapatra has had to file for bankruptcy protection. Several other small brands could be looking at making similar moves if not closing altogether.
As a result, all eyes are on the front rows looking for any LVMH executive who might be checking out potential purchases. Almost everyone would like to be on LVMH’s list, but they typically make only two or three purchases a year when they’re in a buying mood. Still, several designers have their hopes set high. They’re putting in a little more effort to this week’s presentations, a little more pomp, a little more glamour, hoping to prove they are worthy of a significant investment.
Only time will tell whether the effort will pay off.