LVMH Outlines Its Post-Sale Plans for Tiffany & Co.

LVMH has no plans to change the current direction of Tiffany & Co., though it believes it can offer the famed retailer greater support, executives said on a Nov. 25 conference call with analysts.

“Our first and only priority is to implement the strategy that has been described by the management team,” said LVMH chief financial officer Jean-Jacques Guiony.

The call followed news that LVMH had reached a deal to acquire the retailer for $16.2 billion, through a newly created subsidiary called Breakfast Acquisition Corp.

It is customary for companies to say that they won’t make changes to companies they acquire—and not always adhere to that. But it was a theme that Guiony kept returning to on the call, and he even cited it as a rationale for buying the brand.

After disputing an analyst’s contention that LVMH had long considered buying Tiffany, Guiony said that “for a long time, it was not obvious to us what we could do better.

“The answer is that we would not do much better or much differently, but we will enable [its] strategy,” he said. “When you have to do quarterly reporting, it doesn’t help [you take] a long-term view.

“We expect to bring Tiffany time and capital, which are things that are not that easy to get when you are reporting to the stock market,” he continued. “We feel [its] direction is the right one, just the framework and the environment could be made easier.”

Ironically, at a Bloomberg luxury summit on Thursday, Tiffany chief executive officer Alessandro Bogliolo disputed that being a public company had affected how the retailer conducted its business, arguing it has always “tried to do the right thing.”

As far as what will happen to existing management—including Bogliolo and Daniella Vitale, the former Barneys New York CEO who joined the retailer as chief brand officer a few days before the  sale—Guiony said he was not legally allowed to discuss it.

He noted that LVMH will gain a lot from acquiring Tiffany. He called the acquisition an “important milestone” for his company and a “game changer” for its watch and jewelry segment—which will double boost its share of company sales from 9% to 16%.

“We think the jewelry segment is extremely interesting. It has recorded significant growth over the last year. Due to the capital investment nature of this business and due to the fact that, more than other segments in luxury, there is an element of trust. The barriers to entry to this segment tend to be quite high.”

He noted that Tiffany’s vertical integration has made it one of the few retailers that can declare the provenance of its diamonds. That’s something LVMH’s other jewelry brands look at, he said.

“Sourcing and sustainability are quite important, and that is something we could learn from them. They are leaders in that important area.”

He also noted that what Tiffany “has done with e-commerce is impressive, particularly in an area that is not very easy in e-commerce. We expect to learn from that in our other jewelry brands.”

When asked about what LVMH has learned from its acquisition of Bulgari, Guiony said it showed the importance of collections.

“You can have a great brand, you can be well-positioned. But collections are really the core of the brand. One of the real successes we’ve had at Bulgari is we’ve been able to expand their share of collections to an extremely high level.”

He called Tiffany’s plan to remodel its 57th Street flagship “the right thing to do.

“It’s what one has to do from time to time. There should be investment in the whole network.”

In a statement to Tiffany employees, Bogliolo hailed the acquisition as the largest deal ever in the luxury segment.

“This is a tangible sign of the great value of our company.… Tiffany is synonymous with diamonds, with love, with New York, with refinement, with sustainability. We are as proud as ever of the great significance of our brand.”

Board chairman Roger Farah told employees that the board determined this deal “was not only in the best interests of our shareholders, but also the Company’s future as a whole.… The future truly is strong, and we are excited about what Tiffany can achieve in this next chapter of its dynamic story.”

(Image courtesy of Tiffany & Co.)

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JCK News Director