LVMH Deal Fuels Moncler Rally and Speculation on Luxury Sector M&A, Reports Reuters

By Mimosa Spencer and Anna Pruchnicka

PARIS – Shares of Moncler surged on Friday following an investment from the French luxury giant LVMH in the Italian outerwear brand. This move has sparked speculation about LVMH’s long-term intentions regarding Moncler, which is known for its high-end puffer jackets.

Analysts suggest that although the news could reignite rumors of a potential takeover in the future, it primarily highlights the immediate benefits for LVMH as it consolidates its position in the $400 billion luxury market.

Moncler’s shares, which had seen a 6.5% decline this year, soared by as much as 15% early in the trading session after the announcement that LVMH had acquired a 10% stake in Double R, the investment entity managed by Moncler CEO Remo Ruffini’s Ruffini Partecipazioni Holding. Currently, Double R holds a 15.8% stake in Moncler.

This deal translates to approximately a 1.6% stake in Moncler for LVMH, with the potential to increase that to 4% within the next 18 months, according to analysts.

"LVMH is likely positioning itself favorably for potential future opportunities relating to Moncler," noted Luca Solca, an analyst at Bernstein.

As of 0944 GMT, Moncler’s shares rose by 10%, while LVMH’s shares, which have dropped 7.5% in value since the start of the year due to a downturn in the luxury market, saw a 2% increase.

Moncler, headquartered in Milan, has gained recognition as one of the industry’s standout successes and has often been considered a candidate for acquisition as rival luxury companies seek to widen their portfolios.

BOOST FOR LUXURY SECTOR

While LVMH’s current stake is modest and expected to remain so for a while, the move is reminiscent of LVMH’s previous investment in the Italian shoe brand Tod’s, as noted by JPMorgan. In 2021, LVMH increased its stake in Tod’s to 10%, which was characterized as "friendly support" by sources at that time.

"While LVMH is known for its role in consolidating the luxury sector, it has also demonstrated the capacity to be an engaging minority shareholder and long-term partner," stated JPMorgan.

The news of the LVMH-Moncler deal coincided with reports about China implementing further economic stimulus measures, which instilled optimism among investors regarding the revival of spending on luxury goods.

Concerns have been rising over a slowdown in the luxury sector, particularly regarding weaknesses in the key Chinese market, affected by declining economic growth and a real estate crisis.

Piral Dadhania, an analyst at RBC, remarked, "Given the current vulnerabilities in the luxury sector, LVMH is making a strategic investment at an opportune moment."

Moncler’s enterprise value to EBITDA ratio stands at 10.66, in contrast to 31 for Hermes, the strongest performer in the luxury market in recent years. Dadhania noted that taking minority stakes in established companies is an attractive alternative for LVMH to utilize excess capital, especially given potential new taxation on share buybacks in France and a lack of significant M&A targets.

Before the pandemic, Moncler had been perceived as a possible merger target for French fashion group Kering. Since then, Kering has acquired high-end fragrance brand Creed and a stake in the red carpet label Valentino while working on revitalizing sales for its flagship brand Gucci, which has lagged behind competitors.

In their announcement regarding the Moncler investment, LVMH expressed its commitment to supporting Ruffini’s vision for the brand. Ruffini has driven Moncler’s growth through partnerships with fashion designers, star-studded events, and acquisitions, including the purchase of the smaller outerwear brand Stone Island in 2020.