Luxury M&A activity could pick up post-crisis

Image credit:  Gerd Altmann (Pixabay)


(voguebusiness.com) - Stocks of luxury fashion makers aren't perceived by the markets as a totally safe investment anymore in the time of the Covid-19 crisis. With roughly 40 per cent of the global population under lockdown in a bid to curb the spread of the virus, stores need to be closed and consumers have to stay at home. Investors have been reassured by the $2 trillion that the US has put on the table to rescue the economy, but that will probably not address the status of luxury stocks. “Coronavirus hit the luxury industry hard, with stock market valuations of luxury groups shedding a third of their value — or more — since the middle of January,” says Pierre Mallevays, founder and managing partner at financial advisory firm Savigny Partners. “Markets have since recovered somewhat, but we are still down some 20 to 25 per cent for the stronger groups and more for others.” Giants are best positioned to ride out a storm that could destroy the valuation of weaker companies, leaving them ripe for takeover by the survivors. The luxury industry has been consolidating for some time, giving conglomerates with a wide portfolio of brands an edge when it comes to supply chain, real estate, e-commerce, marketing and advertising spend. LVMH and Kering have swallowed up many competitors in recent years and they might be well positioned to accelerate acquisitions given market conditions.