Bulgari Helps LVMH Expand Within Watches and Jewellery

Prior to its acquisition of the Bulgari brand, LVMH’s ‘Watches and Jewelry’ vertical constituted less than 6% of the company’s overall value sales.

However, sales grew the fastest during H1 2011, compared to the same period in 2010, thus highlighting consumer interest in watches and jewellery. Brands such as TAG Heuer, Hublot and Chaumet boosted LVMH’s sales, while Bulgari SpA’s value sales of ‘Watches and Jewelry’ registered growth of over 20% in the first half of 2011.

Concentration on branding activities and retail expansion in China as well as Europe spearheaded this rise for brand Bulgari.

Effect on global competition

Compared to 2010, the integrated reporting of Bulgari led to a substantial 76% rise in LVMH’s ‘Watches and Jewelry’ revenues for the nine months ending September 2011. While it has elevated the strategic importance of the vertical for LVMH, the acquisition has also positioned the luxury goods major as a global competitor to leading personal goods players such as Compagnie Financiere Richemont SA and The Swatch Group Ltd.

According to Euromonitor International, both Richemont and Swatch Group are among the top three players in the combined global landscape of watches and jewellery.

Tracking competitor performance: H1 2011 vs H1 2010
(Current value sales growth %)

Source: Company financial reportsNote: Richemont’s growth reported for five months ending 31 August 2011.

Effect on operations

The aforementioned acquisition provides LVMH with enhanced negotiating clout amongst suppliers and retailers, while also enabling the company to bolster its presence in specific markets such as Italy, China, and the Middle East. Brand Bulgari is also likely to benefit from the larger scale distribution, legal, and retail capabilities employed by LVMH as it looks to increase operating margins over the forecast period.