Hermès Terminates the Conflict with LVMH

Calm has finally arrived at Hermès. More than four years after LVMH provoke an earthquake with its entry into the capital.

Leeson. 09/03/2015
Hermès belt. Make clic to buy
Hermès belt. Make clic to buy
Hermès belt. Make clic to buy

With the departure of two of its top executives, Hermès has terminated the conflict that has continued since 2010 with Louis Vuitton, when the group led by Bernard Arnault said to have a 17% stake in the French maker of luxury accessories. LVMH had already assumed its failure when it delivered among its shareholders a good portion of Hermes shares it held in its balance late last year.

The last measure that can be framed within the process is the exit of deputy general manager of Hermès, Patrick Albaladejo, one of the visible heads of the defense of Hermès in recent years. Albaladejo has been responsible for the strategy and image of the French company for nine years.

Hermès sandalias. Haz clic para comprarlas
Hermès sandals, Make clic to buy

Before him, Patrick Thomas had already left the group, stepping down as CEO last year. Both were the visible heads of the defensive measures taken to prevent a takeover by LVMH, especially the signing of a pact between the three historic shareholder families, Dumas, Puech and Guerrand, who created the holding H51 in 2011 grouping 50.2% of the capital during 20 years.

Now, the big question hanging over Hermès is its stock market future. The hostile position of LVMH in the capital sparked the stock, boosting its value by 50%, reaching its highest ever near €285 in early 2012. Investors then speculated on a possible takeover of Louis Vuitton. Once they were aware of the difficulty of that offer by the resistance of Hermès shareholders, the stock entered into a side channel that has remained until late 2014, when it finally was able to overcome its record, trading above €300 per share.

Hermès watches, make clic to buy
Hermès watches, make clic to buy

From now on, Hermès no longer has the threat of a hostile takeover, so the driving force behind its stock performance will be just the progress of its business. In addition, in the short term, it has to overcome the foreseeable sale of shares by LVMH shareholders who received shares of Hermès but do not want to keep them and prefer to turn them into cash. Hermès is listing with a premium regarding the sector, with a PE ratio of 37 times, so next March 25, when publishing its results, it should give clear evidence that is able to meet analysts’ forecasts for 2015, with increases of nearly 15% at both sales and profit, surpassing €4.7 billion of sales and €1 billion of profit.

Disclosure: The author is not responsible for the views expressed in the article. The text has been written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.


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