Over the weekend, LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury goods conglomerate, announced that it would increase its share in family-owned leather giant Hermes 14.2%, to a total of 17.1% stock ownership. LVMH, which owns such famous labels as Louis Vuitton, Marc Jacobs, Givenchy and Fendi, claims that it will not seek control of Hermes or board representation, but news of the sharp increase in the conglomerate’s ownership of the brand has many wondering if that will remain true for long. Luxury isn’t just a lifestyle, it’s also big business, and Hermes has been among the most profitable properties on the high-end mass market through the recent economic downturn.
Part of the Hermes allure for many clients stems from the fact that the Hermes family still runs the company, even in this day of corporate fashion and massive conglomeration. LVMH doesn’t just buy up shares of luxury brands for fun, and although owning a chunk of Hermes stock is certainly a strong bet in today’s luxury market, one can’t help but wonder about LVMH’s larger goals. Although the company’s spokespeople claim that LVMH merely has its sights on being a longterm Hermes stockholder, luxury watchers would be advised to take that with a proverbial grain of salt.
If LVMH purchased a controlling share in Hermes, would it change your feelings about or perception of either company?