TFR | Strategy Consulting

The Fashion Luxury Industry, like other industries, has seen the rise of big corporations such as LVMH or Kering. Some luxury goods conglomerates are more diversified than others. LVMH portfolio, for example, includes high-end brands in the categories of wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewelry, selective retailing (e.g. Sephora) and other activities (e.g. Radio Classique, Le Parisien).

Luxury and M&A

On the one hand, niche brands from the Long Tail and sustainable brands are competing to legacy players with a different value proposition and also from an online strategy approach.

On the other hand, Gucci, Hermés, Prada, Chanel or Zegna are acquiring some of their suppliers to ensure supply of merino wool, crocodile or python. Companies are investing in every phase of the value chain (raw materials, farms, suppliers) but also in other retailers thru acquisitions. Even family-owned companies like Ermenegildo Zegna invested in another emerging retailer, Thom Browne. On the other hand,

Why corporations or luxury fashion conglomerates? In a volatile economy, having the know-how of a specific industry is a key lever when diversifying in the same segment. Luxury is a clear example of how brands can take profit of being part of a conglomerate and take advantage from economies of scale, centralization of capabilities (e.g. purchasing power, technology, advertising), access to an exclusive network of suppliers, access to capital, access to professional talent, amongst others. The bigger the corporation is, the more control of competitive advantages in a specific industry will have.

But corporations are not always perfect marriages. Some have established cash cows and startups in their portfolio and having to deal different business models and different growth rates and business needs is not easy. In 2018, while Puma and Stella McCartney exited Kering group, Coach acquired Kate Spade and Michael Kors did so with Jimmy Choo.

These are the most important fashion corporations in the fashion and luxury industry:

LVMH: LVMH Louis Vuitton Moët Hennessy is a french multinational luxury conglomerate formed in 1987. It is the only group present in all five major sectors of the luxury market:  Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry and Selective Retailing. LVMH currently employs 156,000 people across the world and reported sales of 46.8 billion euros in 2018. It´s current president and CEO is Bernard Arnault. See complete 2018 consolidated financial statement here.

LVMH Fashion brands: Berluti, Celine, Christian Dior, Emilio Pucci, Fendi, Givenchy, Kenzo, Loewe, Loro Piana, Louis Vuitton, Marc Jacobs, Moynat, Nicholas Kirkwood, Pink Shirtmaker, RIMOWA. In July 2019, Stella McCartney and LVMH have reached an agreement to further develop the Stella McCartney House.

LVMH Revenues by business group

KERING: In 1963, François Pinault founds Établissements Pinault, a timber trading company, in Rennes (France).  The group’s first strategic move comes in 1990 with its diversification into specialized retail distribution. Its focus will then shift to the luxury industry in the late 1990s.  After acquiring Le Printemps and an equity stake in La Redoute, it becomes Pinault Printemps Redoute in 1994, PPR in 2005 and Kering in 2013. Kering is a global Luxury group composed of iconic and dynamic Houses in Fashion, Leather Goods, Jewelry and Watches. In 2018, the Group achieved revenues of €13.7 billion with a EBITDA margin of 32,5%. See Group Key Figures here.

KERING Fashion Brands: Alexander McQueen, Brioni, Gucci, Bottega Veneta, Balenciaga, Saint Lauren.

Kering brand portfolio

Richemont: Switzerland-based luxury goods holding company founded in 1988 by South African businessman Johann Rupert. Richemont owns several of the world’s leading companies in the field of luxury goods, with particular strengths in jewellery, watches and writing instruments.  In 2010, Richemont acquired the majority of the shares of NET-A-PORTER.COM, the premier online luxury fashion retailer that merged with YOOX Group in 2015. In 2018, Richemont achieved revenues of €10.9 billion with an operating profit of €1,8 billion.

Richemont fashion brands: Peter Millar, Chloé, Purdey, Alaïa, Serapian and Dunhill.

Prada Group: is an Italian luxury fashion house, specializing in leather handbags, travel accessories, shoes, ready-to-wear, perfumes and other fashion accessories, founded in 1913 by Mario Prada. Today, Miuccia Prada is head of Design and Patrizio Bertelli is the CEO. Prada Group achieved revenues of €3 billion in 2017, an EBIT margin of 11,8% with 625 DOS in 70 countries.

Prada fashion brands: Prada, Miu Miu, Car Shoe and Church´s.

Prada Group

OTB: OTB is an international fashion group, the parent company of fashion brands Diesel, Maison Margiela, Paula Cademartori, Marni, Viktor & Rolf,  Brave Kid and Staff International. The brand is chaired by Diesel founder Renzo Rosso. In 2017, OTB achieved revenues of 1.52 billion euro and EBIT of 21.5 million euros.

AEFFE:  Italian luxury group created in 1988 by Alberta Ferretti. In 2018 achieved revenues of €346,6 million and EBITDA of €43,3 million.

AEFFE brands include Alberta Ferreti, Moschino, Philosophy di Lorenzo Serafini and Pollini.

PVH: PVH Corp., formerly known as the Phillips-Van Heusen Corporation, is an American clothing company founded in 1881. Today, is one of the largest global apparel companies with nearly $9 billion in  revenues and an EBIT of 632 millions in 2017. See Annual Report here.

PVH Brands are Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Speedo, Warner´s, Olga, Geoffrey Beene and True&Co.

Arcadia Group: is a British multinational retailing company headquartered in London and owned by Taveta Investments. Their story began in the early 1900s when 18-year-old Lithuanian émigré Montague Burton established a chain of Burton stores selling ready-to-wear and bespoke suits. In 2017, Arcadia Group achieved revenues of £1,9 billion and EBIT of £119,3 M.

Arcadia fashion brands: Burton, Dorothy Perkins, Evans, Miss Selfridge, Topman, Topshop and Wallis.

VF Corporation: In October 1899, the company is first established in Pennsylvania as the Reading Glove and Mitten Manufacturing Company by John Barbey and a group of investors. Today VF is an American worldwide apparel and footwear company with more than 25 brands organized into four categories: outdoor, active, work and jeans. In 2017, achieved revenues of $11,8 billion and EBIT margin of 12,7%. See annual report here.

VF brands: Altra, Icebreaker, Eastpak, Smartwool, JanSport, The North Face, Timberland, Eagle Creek, Kipling, Napapijri, Vans, Bulwark, Dickies, Horace Small, Kodiak, Red Kap, Terra, Walls, Workrite, VF Solutions, Lee, Riders by Lee, Rock & Republic, Wrangler.

VF Corporation