LVMH is paring back its wardrobe of brands. The French luxury group is selling Donna Karan to U.S. fashion company G-III for $650 million in a rare fashion cast-off. Its last significant fashion disposal was of Christian Lacroix over 10 years ago. Other underperforming brands may be flogged as global sales of designer goods slow, presenting opportunities for smaller but ambitious luxury players.
Donna Karan joined the Louis Vuitton owner's stable of brands in 2001, but is likely to make an operating loss this year on 250 million euros of sales this year, according to Citi. As revenue growth slows across the luxury sector, even a giant with 72 billion euros of market capitalisation like LVMH needs to run a tighter ship. Reported revenue growth at the group's fashion division was flat in the first quarter of 2016, down from 13 per cent in the same period last year.
Marc Jacobs, another U.S. straggler brand at LVMH, could be next in the line of fire. At rival luxury conglomerate Richemont, Alfred Dunhill and Lancel are a distraction as the Cartier owner grapples with a downturn in demand for its expensive watches and jewellery. Kering, which runs Gucci, sold loss-making luxury footwear brand Sergio Rossi late last year to private equity firm Investindustrial.
Donna Karan's new owner G-III already has Calvin Klein, Tommy Hilfiger and Ivanka Trump's brand under its belt. And the group is good at selling all-American fashion labels - G-III expects full-year revenue growth in the region of 9 per cent. Donna Karan suits G-III's links to department stores, while LVMH has spent the past decade focusing on standalone stores for its brands.
Smaller luxury groups may prove better stewards of struggling fashion houses. Mayhoola, the Qatari group which bought French label Balmain in June, snapped up troubled Valentino in 2012. Sales increased 9 per cent in the first three months of this year, and there are plans to float the Italian brand in the near future. Snaffling LVMH's B-list brands may turn out to be a good move.
Donna Karan joined the Louis Vuitton owner's stable of brands in 2001, but is likely to make an operating loss this year on 250 million euros of sales this year, according to Citi. As revenue growth slows across the luxury sector, even a giant with 72 billion euros of market capitalisation like LVMH needs to run a tighter ship. Reported revenue growth at the group's fashion division was flat in the first quarter of 2016, down from 13 per cent in the same period last year.
Marc Jacobs, another U.S. straggler brand at LVMH, could be next in the line of fire. At rival luxury conglomerate Richemont, Alfred Dunhill and Lancel are a distraction as the Cartier owner grapples with a downturn in demand for its expensive watches and jewellery. Kering, which runs Gucci, sold loss-making luxury footwear brand Sergio Rossi late last year to private equity firm Investindustrial.
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Smaller luxury groups may prove better stewards of struggling fashion houses. Mayhoola, the Qatari group which bought French label Balmain in June, snapped up troubled Valentino in 2012. Sales increased 9 per cent in the first three months of this year, and there are plans to float the Italian brand in the near future. Snaffling LVMH's B-list brands may turn out to be a good move.