LVMH’s wait for Hermés

Thursday, 30 December 2010
FashionUnited Top 100 registered a little drop Wednesday, when the international fashion benchmark closed at1,258.51 points, down by 0.72 and amid the last movements to close the Hermés-LVMH affaire.

The so-called deal of the decade within the apparel and luxury sector will have to wait until next January to be cleared up. LVMH has to extreme its patience a couple of weeks more to know the verdict of the Hermés stakeholders.

As summed up by Reuters, the French luxury group decided earlier this month to create a holding that would allow family shareholders to control more than 50 percent of equity to defend itself against LVMH's unwelcome swoop on more than 20 percent of its share capital.

Legally, shareholders, once united through a pact or a holding, need to launch a buyout of other shareholders once their holding climbs above 33 percent. French market regulator the Autorite des Marches Financiers (AMF) said Wednesday it will decide in January whether to allow family shareholders of Hermes International SCA (RMS.FR) to tie up over 50% of the company in a holding firm without being required to launch a full takeover of Hermes. "The (AMF) board should take its decision in January after having gathered opinions and arguments from various parties," Thierry Francq, AMF Secretary General told Reuters.

LVMH announced last week it owned 20.21 percent of Hermes, after having discreetly built up a 17.1 percent stake starting in 2008, mainly via derivatives. Under such an uncertain end of the year, the French emporium lost 0.04% at the market close yesterday.

Good news though for all those luxe retailers based in the UK, as wealthy Chinese tourists are expected to spend a billion pounds on luxury goods during the sales, it emerged yesterday. The booming ‘Peking Pound’ has accounted for almost a third of post-Christmas purchases of high end goods such as Burberry, Mulberry, Louis Vuitton and Gucci. UK markets return then from the long holiday in positive mood, largely ignoring negative developments such as China's Christmas Day quarter-point interest rate rise to curb inflation and disappointing falls in US house prices and consumer confidence overnight. Among the head group it was Burberry, accounting for just over one FTSE point.

Crossing the Pond towards the USA, the Financial Times reported the S&P 500 retail index edged up 0.3 per cent after slipping in recent days as investors took profit when the stocks reached three-year highs during the holiday shopping season

The International Council of Shopping Centers (ICSC) and Goldman Sachs released their weekly index of chain-store sales this week. The report shows that chain store sales during the week of December 25th were up 1 percent from the prior week and up 4.8 percent year-over-year. This was especially good news for the sector given that last month ICSC, the National Retail Federation and ShopperTrak all raised their expectations for retail sales gains over the holiday season because they expected this season to have the highest increase in sales seen in 5 years—and the actual results beat even those optimistic projections.

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