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Hermes Ascends to World’s Leading Luxury Goods Company, Surpassing LVMH
French luxury goods purveyor Hermes has eclipsed LVMH, its long-time rival, to claim the title of the world’s largest luxury goods firm. This shift in market dominance occurs 15 years after Hermes successfully resisted a takeover attempt by LVMH.
Market Shift in Luxury Goods Sector
The esteemed French company, renowned for its iconic silk scarves and highly coveted Birkin handbags, secured the top position following a downturn in LVMH’s stock value. Shares in LVMH, the parent company of Louis Vuitton and Givenchy, experienced a significant drop after the conglomerate released a trading update that fell short of market expectations.
LVMH’s Sales Dip Triggers Stock Decline
LVMH announced a 3% decrease in sales, amounting to £17.5 billion, for the initial three months of the year after Monday’s trading concluded. This announcement precipitated a 7.8% decrease in the value of LVMH shares.
Hermes’ Market Value Soars
Conversely, Hermes shares saw a slight increase of 0.2%, elevating the company’s market capitalization to £215 billion, exceeding LVMH’s £209 billion. This marginal share increase for Hermes was enough to propel it to the forefront of the luxury market.
The Handbag War: A Decade of Rivalry
This ascent to the zenith of the luxury goods industry marks a significant milestone for Hermes, overtaking its French competitor more than a decade after a period of intense corporate conflict known as the ‘handbag war’ unfolded.
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Flashback to 2010: LVMH’s Takeover Attempt
In 2010, Bernard Arnault, the chairman of LVMH, initiated efforts to persuade the Hermes family, descendants of founder Thierry Hermes, who established the fashion house in 1837, to divest their holdings. This approach followed LVMH’s discreet accumulation of a 17% stake in Hermes.
Hermes Family Resists, LVMH Forced to Divest
However, the Hermes board firmly rejected Arnault’s advances. Subsequently, after a legal dispute, LVMH was compelled to relinquish its acquired shares in Hermes, solidifying Hermes’ independence.
LVMH’s Recent Financial Setbacks
The change in leadership in the luxury market represents a further challenge for LVMH. The company’s stock has depreciated by nearly 40% over the preceding year, with over 15% of this decline occurring since US President Donald Trump declared tariffs earlier this month.
Arnault’s Fortune Diminishes Amidst Market Turmoil
This downturn has resulted in a £10 billion reduction in Arnault’s personal wealth. Despite this substantial loss, he maintains his position as France’s wealthiest individual with a fortune of £125 billion.
Luxury Sector Slowdown and Future Outlook
The luxury sector has faced headwinds as the surge in consumer spending, termed ‘revenge spending’, that followed the pandemic has dissipated in the past couple of years.
Trump’s Tariffs Dampen Recovery Hopes
Anticipated recovery prospects have been further undermined by President Trump’s implementation of significant tariffs on goods from China, a crucial global market for premium luxury items. This has created uncertainty in the luxury market.
LVMH’s Shifting European Ranking
LVMH had previously held the position of Europe’s most valuable firm until September 2023, when it was overtaken by Novo Nordisk, the pharmaceutical manufacturer of the weight loss medication Ozempic.
Current European Market Leaders
Presently, LVMH is ranked behind several European giants, including Europe’s leading company, the German software corporation SAP, as well as Novo Nordisk and now Hermes.
Hermes’ Resilience in a Challenging Market
Hermes has demonstrated greater resilience amidst the deceleration in luxury demand. Its financial performance tends to exhibit less fluctuation compared to competitors. This stability is attributed to Hermes’ robust pricing strategy and the extensive waiting lists for its signature Kelly and Birkin handbags, indicating enduring desirability and exclusivity.