Top five companies included in the index contribute to almost 80 percent of the total sales generated by all 17 companies, reveals The Savigny Luxury Index (SLI).
LVMH, the leading luxury goods conglomerate, has played a pivotal role in saving the industry from decline through its strategic initiatives. However, the entry of major players like Kering (formerly known as PPR) has disrupted LVMH's dominance and reshaped the landscape of luxury conglomerates.
Among these conglomerates, LVMH stands out with a significant market share, accounting for 42 percent of SLI revenue, 45 percent of SLI enterprise value, and owning 75 out of the 190 brands covered by the index. In terms of acquisitions, LVMH has been the most active, completing 140 deals since 2000, surpassing its closest competitor, Kering, by a considerable margin.
The pursuit of scale in the luxury industry is primarily driven by profitability. The top five companies in the SLI, all with turnovers exceeding €10 billion, achieved an average EBITDA margin of 31.2 percent in the previous year. In contrast, the remaining SLI companies averaged a margin of 20.6 percent.
For conglomerates like Kering and LVMH, owning multiple brands has proven advantageous. Leveraging the power of one brand to negotiate favorable placements for others and reallocating management resources as needed contribute to their success. Although diversifying risk and capitalizing on fresh brands can be beneficial, flagship brands such as Louis Vuitton and Gucci continue to be the primary drivers of profits for these groups.
LVMH's expansion into the watches and jewelry sector began in the late 1990s through acquisitions and joint ventures. Despite losing some acquisition battles with Richemont, LVMH's strategic vision and resources enabled the company to significantly enhance the performance of the acquired brands. Notably, LVMH's acquisition of Tiffany for $15.8 billion propelled its watches and jewelry division to the second position in the industry, trailing only behind Richemont.
Speculation regarding a potential merger between Richemont and Kering, which could challenge LVMH's dominance, has circulated. However, even if such a merger were to occur, the combined entity would still be half the size of LVMH in terms of turnover.
