3 MINUTE READ | September 10, 2020
LVMH, Lululemon and the Changing Luxury Retail Landscape
Abby is PMG’s senior managing editor, where she leads the company’s editorial program and manages the PMG Blog and Insights Hub. As a writer, editor, and marketing communications strategist with nearly a decade of experience, Abby's work in showcasing PMG’s unique expertise through POVs, research reports, and thought leadership regularly informs business strategy and media investments for some of the most iconic brands in the world. Named among the AAF Dallas 32 Under 32, her expertise in advertising, media strategy, and consumer trends has been featured in Ad Age, Business Insider, and Digiday.
This week, LVMH announced it would be backing out of its $16.2 billion takeover of Tiffany & Co. The luxury retail giant said the deal was off because the arrangement was being brought into trade disputes between France and the U.S. Administration. LVMH cites a letter from the French foreign ministry that requested for the deal to be delayed until after January 6, 2021 — more than a month after the closing deadline outlined in the initial merger arrangement. The French foreign ministry letter is now serving as a “pretext” for LVMH to back out of the deal to acquire Tiffany & Co. Meanwhile, Tiffany & Co. has filed suit against LVMH with claims that the French retail giant was delaying renegotiating the takeover agreement.
Some suggest this move is the result of how the pandemic has reshaped the luxury industry. As tourism demand for notable luxury retail destinations such as New York, Milan, and Paris dwindles and shows no signs of returning, the luxury retail experience is becoming even more reliant on ecommerce operations as in-store, department store and big-ticket purchases wane.
LVMH is now one of many companies entangled in geopolitical trade disputes between the U.S. and other countries, including ByteDance’s TikTok in China and proposed tax plans being set up to target American tech giants in Europe.
In other news, Lululemon reported plenty of surprises in its earnings report on Tuesday. The company’s revenue increased by roughly two percent to $902.9 million from $883.4 million last year, showing how athleisure is a clear winner as more people spend time at home amid the pandemic. Wall Street’s expectations were set at just over $840 million. Online sales were reportedly up an incredible 157 percent, even as brick-and-mortar locations re-opened throughout the quarter. The closures resulted in in-store sales dropping 51 percent YOY. Lululemon says 97 percent of stores are now open, with store sales equating to 75 percent of last year’s numbers.
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On the earnings call, Lululemon executives spoke extensively about its investments in the connected fitness sector, including its recent acquisition of Mirror. Heading into the holiday season, Lululemon says Mirror will be available in 10-15 stores by the fourth quarter, while also being added to the retailer’s online store and marketing programs across social channels. Lululemon anticipates Mirror to pull in more than $150 million in revenue this fiscal year.
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