Business News Why LVMH Has Bought Tiffany & Co., And What This Might Mean For Watch Collectors

While both firms make Swiss luxury watches – LVMH owns TAG Heuer, Bulgari, Hublot, and Zenith – this deal is decidedly about jewelry. Jewelry accounted for 92% of Tiffany’s total sales of $4.44 billion last year. 

LVMH, with its 75 brands and 4,590 stores, is the world leader in so-called soft luxury products. The Tiffany takeover marks a bold bid by LVMH Group founder and Chairman Bernard Arnault to bolster LVMH’s presence in hard luxury. 

Branded jewelry is the fastest growing segment of the fine jewelry market. Tiffany has that in spades. The firm, which was founded in New York in 1837, is one of the world’s most celebrated luxury brands. LVMH called it “the leading luxury brand originating in the United States,” in a statement announcing the deal. Tiffany produces jewelry in three broad categories: jewelry collections ($2.3 billion in sales in 2018); engagement jewelry ($1.16 billion); and designer jewelry $544.5 million). It is also a giant jewelry retailer, with 321 stores around the globe.

Watches are a tiny part of Tiffany’s business. We’ll see if that changes under LVMH. Tiffany produces Swiss-made luxury watches, primarily ladies’ quartz pieces, at its facilities in Ticino, Switzerland. It does not disclose its watch sales. Instead, it includes them in a category called “All Other” in its financial statements, along with fragrances and home and accessory products. That category had sales of $366.1 million last year.

Analysts say the move complements LVMH’s $5.2 billion purchase of the Italian jewelry and watch producer Bulgari in 2011. Bulgari is positioned more as a high-jewelry house than Tiffany, which is strong in the bridal diamond jewelry category. It also presages increased competition in the jewelry sector between LVMH and the world’s second-largest luxury products group, Richemont, whose jewelry division includes Cartier, Van Cleef & Arpels, and the newly acquired Buccellati.

Analysts also cite two other strong strategic fits for Tiffany within LVMH. It gives the group a new foothold in the U.S. market, where Tiffany is a cultural icon. Nearly half (44%) of Tiffany sales come from the Americas region.

Tiffany is also strong in China, where the brand is well known. It has 35 stores in mainland China and 10 in Hong Kong.

Asia Pacific is Tiffany’s second strongest region, with sales of $1.24 billion last year.

Ever since the rumor of this deal surfaced, there has been chatter within the community about what it might mean for watches – or more directly, if the transaction will change the relationship Tiffany & Co. has with one of horology's foremost manufactures, Patek Philippe. Tiffany is Patek's oldest retailer for its US distributor, the Henri Stern Watch Agency, and among the oldest in the world for Patek as a whole. Tiffany retains almost exclusive rights to stamp its name on the dial of any Patek it retails, making them, to many, even more desirable. "Tiffany-signed" Pateks have, in recent years, taken on a special place in modern watch collecting, with such examples at times trading well above non-signed examples, despite selling for the same retail prices. 

It should be noted that the spike in demand for Tiffany-signed dials has created problems for Patek Philippe, with all other retailers complaining that many of their top clients are now interested in purchasing only from Tiffany & Co., for the value-add of the stamp. This leaves many great retailers, even those in major markets, with clients that are frustrated when their watches do not perform as well as those retailed by Tiffany on the secondary market. Further, it is common for most watch retailer agreements to feature a "change of ownership" clause, meaning that should any retailer's majority ownership change, the distributor has a right to cancel the distribution agreement. This would, of course, give Patek Philippe a graceful exit to the relationship that has caused this disparity among one retailers and all others - a disparity that would likely only continue to worsen as global watch tastes continue to homogenize. Having said that, there have been rumors that Patek Philippe will be offered for sale in the coming years and one of the only luxury groups in the world that would have the means to purchase it at a significant price is LVMH. So perhaps the Sterns will continue to allow Tiffany to sell its watches as a nod to a potential suitor down the road. Only time will tell.

Finally, regardless of Patek Philippe's future with Tiffany & Co., which is not a meaningful number for either company, one wonders if LVMH might use the Tiffany platform to create demand for its own watch brands. Will we soon see Tiffany-signed TAG Heuers, Zeniths, and Hublots? The move would certainly create a lot of buzz within the community and perhaps jumpstart the three brands into higher levels of collectibility.