Hermes Birkin Bags, IPhone Cases Spark LVMH’s Stake

LVMH Moet Hennessy Louis Vuitton SA Chairman Bernard Arnault’s investment in Hermes International SCA brings him closer to the luxury brand he has been trying to emulate for years. LVMH said late yesterday it may buy more Hermes shares after announcing on the weekend it spent 1.45 billion euros ($2 billion) on 17.1 percent of its Paris-based rival. The investment comes as Louis Vuitton steps up efforts to become more like Hermes by increasing prices, investing in leather production and focusing a marketing campaign on craftsmanship. “It looks like they’ve decided, ‘if you can’t be them, buy them,’” said Paola Brandi, visiting professor at Paris-based fashion university ESMOD, in a phone interview. Mirroring the waiting lists to obtain a coveted Hermes Birkin bag, some Vuitton customers have had to sign up for its laminated canvas purses as demand outstrips supply, Arnault said in July. Since September, he’s shuttered 13 of the company’s 14 standalone stores in France an hour early each day, saying Vuitton, known for its LV monogram, needs to preserve stock for the holiday period. Vuitton has 458 stores worldwide. Hermes shares, most of which are held by members of its founding family, have more than doubled over the past five years, valuing the company at 16.9 billion euros. They fell for a third day today, dropping 1.5 percent to 163.45 euros at 4:35 p.m. in Paris. LVMH’s stock has increased 57 percent in the same period, giving it a market capitalization of 55 billion euros. LVMH shares advanced 0.4 percent to 112.35 euros in Paris trading today. ‘Strategic’ Stake “LVMH’s investment in Hermes International has a strategic and long-term character,” LVMH said in a statement to France’s stock market regulator late yesterday, using the word “strategic” for the first time. “LVMH supports Hermes International’s strategic vision, its growth and positioning.” Hermes, which didn’t know about LVMH’s stake-building, said the family wants to maintain the company’s independence. Hermes’s best-seller is the Kelly bag, named after Princess Grace, which retails from 7,000 euros in the euro-zone, according to Allegra Perry, an analyst at Nomura International Plc in London. Vuitton’s is the 500-euro Neverfull. Vuitton makes an iPhone 3G case for $250 in monogrammed canvas. Hermes sells a $315 calfskin case for the Apple Inc. device. “Relative to Louis Vuitton, Hermes has a tighter range with a higher average price point,” Perry said in an Oct. 25 report.