LVMH’s Expansion and Richemont’s Leadership Transition
With LVMH's bold expansion plans and Richemont's impending leadership transition, the stakes have never been higher.
You’ll forgive the pun, but what happened this week between LVMH – or rather, Bernard Arnault – and Richemont reminded me of the famous song by rapper NAS “The World Is Yours.” In this context, I’d change it to “The Watch Is Yours.”
The New York artist draws inspiration from a scene in Scarface (1983) where Tony Montana is in a villa and sees a blimp with the message "THE WORLD IS YOURS," symbolizing that after a fierce career he has finally reached the top the future is all in his hands.
The parallel with Arnault is limited solely to the significance that this group has been able to achieve. LVMH entered the watch world wholeheartedly, making substantial investments and quickly becoming an increasingly prominent company thanks to the prowess of Bernard and his sons Frédéric and Jean.
n the past weeks, more precisely around June 25th, news echoed among the major economic and financial newspapers that Bernard Arnault, CEO of LVMH, had purchased a small stake in Compagnie Financière Richemont. The Financial Timesof London, citing two people familiar with the matter, revealed that it was a personal investment, too small to be disclosed in public records and does not indicate an intention to take a further step into the Swiss luxury goods company.
The motivations for this move remain a mystery today, but this investment has sparked some speculation about a possible acquisition because Richemont is preparing for a succession challenge, with owner and chairman Johann Rupert about to retire.
On this topic, long before this acquisition, dedicated newspapers have been reporting a possible takeover of Richemont by its competitors, primarily LVMH and Kering.
According to WAQT, the genesis of these rumors can be traced back to a February 2023 article by the Swiss newspaper Finanz und Wirtschaft, citing information from "whispers behind closed doors." The Financial Times recently revived these old rumors, suggesting a potential attempt by LVMH or Kering to acquire the Swiss luxury group Richemont. The particular focus on Cartier is evident, as according to Morgan Stanley, it contributes about 10 billion euros, or half of the group's annual sales. Despite acknowledging past collaboration proposals from rival Kering, Richemont chairman Johann Rupert has unequivocally declared he has no intention of selling the luxury goods company under his control.
For Kering, this merger would mean combining their power in the fashion world with Richemont's strength in jewelry, leveraging the power of brands like Cartier and Van Cleef & Arpels. For the French giant led by Bernard Arnault, it could be a golden opportunity to assert their dominance in the market, offering new proposals especially regarding the world of watchmaking. With this acquisition, LVMH would expand its portfolio of watch brands, a field in which the Arnault family is investing heavily. Adding Richemont's maisons such as Vacheron Constantin, Panerai, Jaeger-LeCoultre, and IWC to the already present Bulgari, Tag Heuer, Hublot, and Zenith would be an incredible coup.
However, the upheavals in Richemont do not end here; in recent weeks there have been significant changes within the management.
A few weeks ago, we analyzed Richemont's financial results and the simultaneous appointment of Nicolas Bos, former CEO of Van Cleef & Arpels, as CEO of the group starting June 1, 2024.
Now we have also discovered that his position will be taken by Catherine Rénier, currently CEO of Jaeger-LeCoultre. This is a very interesting transition because Rénier will move from a brand that represents a milestone in watchmaking to one more connected to jewelry. It is reasonable to expect, given the new CEO's background, that Van Cleef will accelerate in the watch sector as well.
Cartier is also changing; Cyrille Vigneron, after eight years at the helm of Cartier, will retire and take on the role of President of Cartier Culture & Philanthropy, passing the baton to Louis Ferla, currently CEO of Vacheron Constantin.
Vigneron's work has been phenomenal. Limiting ourselves to just watches, Cyrille has been able to lead the maison on a constant growth path, reaching second place in the world in 2023 for sales, totaling around CHF 3 billion, according to Morgan Stanley. The baton is passed to another great executive who became CEO of Vacheron Constantin in 2017, when the maison was in 12th place in sales, and has been able to bring it to 8th place in 2023, with an estimated revenue of over CHF 1 billion, according to Morgan Stanley.
The battle between LVMH and Richemont in the luxury watch world is destined to intensify in the coming years. LVMH, under the visionary leadership of Bernard Arnault and the support of his family, continues to expand its empire with strategic moves and targeted acquisitions. On the other hand, Richemont is going through a critical transition period with changes in management and the need to address the succession issue. Only time will tell if Arnault's investment in Richemont will mark the beginning of a new era for the luxury watch sector, but one thing is certain: "The Watch Is Yours" resonates more true than ever.
