Ferrari and HP Join Forces

Welcome to the 35th edition of Maximalist! Dive into the ultimate guide, filled with insider insights into the world of fashion, art, real estate, travel, jewelry, and horology.

The world of luxury is never boring, and this week is no exception. Let’s dive in!

Markets

On this week’s agenda:

1. L'Occitane Go-Private Offer Values Company at €6 Billion

2. Nobu’s Path to 80 Hotels in 5 Years

3. Ferrari and HP Join Forces

4. Hermès Outperforms Market with a 17% Rise in Q1 ‘24

5. FTC Challenges Tapestry's $8.5 Billion Acquisition of Capri Holdings

6. The 2024 Positive Luxury Awards Winners

L'Occitane Go-Private Offer Values Company at €6 Billion

Billionaire Reinold Geiger has made a substantial offer to privatize the skincare company L’Occitane, presenting a valuation of approximately €6.5 billion for the firm. Geiger, who currently has substantial control over the company, intends to buy out the remaining shares at HK$34 each, a move that would result in the delisting of L’Occitane from the Hong Kong stock exchange. This offer price marks a significant increase from L’Occitane’s last closing share price of HK$29.5.

The total value of the transaction would reach HK$13.91 billion (about €1.7 billion), reflecting an equity valuation of €6 billion for L’Occitane. Geiger’s investment entity, based in Luxembourg, already holds 72% of L’Occitane’s shares as of the end of March. To consolidate his ownership, Geiger has secured commitments from approximately a quarter of the remaining shareholders to sell their shares, and another 12.7% have indicated they are either planning to accept the offer or recommend it.

Trading of L’Occitane shares has been paused since April 9 in anticipation of this significant announcement, with plans to resume trading on the following Tuesday. A board-appointed committee is set to review Geiger’s proposal thoroughly and will provide guidance to the minority shareholders on whether to accept the buyout offer.

The financing for this deal will include ~€1.5 billion in debt, provided mainly by Blackstone and Goldman Sachs, with additional support from Crédit Agricole. Both Blackstone and Goldman Sachs Asset Management have refrained from commenting on their participation in the financing.

In his statement, Geiger highlighted the ongoing transformations within the cosmetics industry and noted that this buyout would allow L’Occitane to focus more effectively on building a sustainable foundation for future growth. Established in 1976, L’Occitane has expanded its original skincare business to include other brands such as Dr Vranjes and Sol de Janeiro, specializing in fragrances and skin care products, respectively.

Despite a previous unsuccessful attempt to delist the company in September, which adversely affected its stock prices, L’Occitane has experienced a notable increase in sales, which rose 13% to €2.13 billion in 2023. Its shares have appreciated by more than 20% since the start of the year. The Asia Pacific region remains a critical market for L’Occitane, representing 42% of its total sales, with Europe and the Americas also showing robust growth.

The global beauty and skincare market continues to demonstrate resilience, even in the face of economic challenges such as rising interest rates and inflation. Industry leaders like LVMH-owned Sephora and L’Oréal have reported results that surpass expectations. However, the market in China is becoming increasingly challenging for beauty companies due to a decline in consumer confidence and severe competition from local brands.

Nobu’s Path to 80 Hotels in 5 Years

In a recent discussion, Trevor Horwell, CEO of Nobu Hospitality, outlined the company's ambitious plan to expand their luxury hotel operations to 80 locations globally within the next five years. The strategy leverages the strong revenue generated by their restaurants and the star power of co-founder Robert De Niro.

Nobu, initially a high-end Japanese restaurant that first opened in New York 30 years ago, has grown to include about 50 restaurants worldwide. The brand ventured into the hotel industry in 2013, opening its first Nobu Hotel in Las Vegas at Caesars Palace. This month, Nobu announced the upcoming launch of its 40th hotel, set to open in Ho Chi Minh City in 2026.

Horwell explained that Nobu’s successful business model and profit-and-loss statements make the brand attractive to developers. He highlighted that a seat in a Nobu restaurant typically generates as much revenue as a hotel room, illustrating the dual-income stream that supports the brand’s robust financial performance. Horwell stated, “At Nobu, we make as much on an average restaurant seat as we do in a hotel room.”

Nobu's expansion strategy is further supported by significant partnerships with major players like Caesars Entertainment and Thailand's Asset World. The brand has also ventured into the branded residences market, with projects in locations like Toronto, Canada, and Los Cabos, Mexico, including a record-setting penthouse sale in Abu Dhabi.

The initiative for Nobu Hotels originated from the founders recognizing an opportunity to extend their brand from just managing restaurants within hotels to owning and operating their own hotels. This strategic decision was influenced by De Niro’s vision for the brand to undertake its own hotel management and maintain the unique essence of Nobu. De Niro expressed, “I want it to be special,” emphasizing the unique approach Nobu takes in its operations.

Nobu's corporate culture plays a crucial role in its operations, with Horwell emphasizing the importance of professional pride and opportunities for advancement that keep employees engaged and motivated. He also noted that the company’s streamlined management structure allows local leaders to effectively drive performance at each hotel.

As Nobu continues to grow, Horwell remains confident in the brand’s careful scaling strategy, ensuring that expansion does not dilute the luxury experience but rather enhances their global presence in the hospitality market. Horwell remarked, “We don’t need capital to grow to 70 or 80 hotels. Our existing partner network of real estate investors can put up all we need,” demonstrating his confidence in the planned expansion.

Ferrari and HP Join Forces

On April 26, 2024, Italian luxury automaker Ferrari revealed a new partnership with California-based IT giant HP, aimed at boosting its racing team's technological capabilities. The collaboration will see Ferrari’s Formula One team, Scuderia Ferrari, rebranded as "Scuderia Ferrari HP." This change will officially commence at the upcoming Miami Grand Prix.

Benedetto Vigna, CEO of Ferrari, expressed his enthusiasm for the partnership, stating, "Our founder instilled in us a relentless pursuit of progress. This partnership with HP reflects our shared values and our commitment to innovation on the racetrack and our broader efforts towards a sustainable future." He added, “We are eager to embark on this journey together, embracing the new challenges and opportunities it brings.”

The partnership will be highlighted at the Miami Grand Prix, scheduled from May 3 to 5, where Ferrari will introduce its new team name across all its racing divisions, including the Scuderia Ferrari Esports team and the Scuderia Ferrari Driver Academy.

In addition to rebranding, the collaboration with HP will enhance Ferrari's educational initiatives and extend cutting-edge technology like adaptive computers, advanced conferencing technologies, and printing capabilities to both its Formula One vehicles and its operational facilities.

At the Florida event, the newly branded Scuderia Ferrari HP will unveil a special livery reflecting the coastal themes of Miami, where the races are set to occur.

Enrique Lores, CEO of HP Inc., also commented on the collaboration, "The partnership between HP and Ferrari is a seamless fit, combining our technological prowess with Ferrari’s legendary performance and craftsmanship." He continued, “This collaboration not only allows us to tap into new markets and drive growth but also enables us to make a positive impact on our communities and accelerate sustainable innovation on a global scale.”

This move by Ferrari follows a trend among luxury automakers, such as Porsche, who have also recently embraced similar technological partnerships to enhance their competitive edge and market presence.

Hermès Outperforms Market with a 17% Rise in Q1 ‘24

On April 25, 2024, luxury fashion house Hermès announced a robust 17% increase in sales during the first quarter of 2024, achieving a total of €3.8 billion EUR. This significant growth comes amidst a general slowdown in the luxury goods sector, showcasing Hermès' strong market performance.

The renowned Birkin brand reported impressive growth across all regions. Particularly notable was a 14% rise in sales in the Asia Pacific region, excluding Japan. This increase was attributed to Hermès' strategic value approach, which managed to counteract lower traffic in Greater China following the Chinese New Year festivities. Eric du Haelgouet, Hermès' Chief Financial Officer, highlighted the sustained demand for the brand's high-end leather goods, fashion, and jewelry, which compensated for the reduced store visits in the area.

In Japan, Hermès enjoyed a remarkable 25% increase in sales, a testament to the deep loyalty of its Japanese customers. The Americas region saw a 12% growth in sales, driven by engaging brand experiences such as the traveling exhibition "Hermès in the Marking." Europe (excluding France) and France reported increases of 15% and 14%, respectively, further underscoring the brand's strong performance in established markets.

By product line, Hermès' leather goods and saddlery led with a 20% increase in sales. The ready-to-wear and accessories sectors also performed well, with a 16% rise, while silk and textiles grew by 8%. Additionally, the perfume and beauty, along with the watches divisions, each recorded a 4% increase in sales.

Looking to the future, Hermès is setting ambitious targets for continued revenue growth, supported by its highly integrated artisanal production model, a well-balanced distribution network, innovative collection designs, and a loyal customer base.

FTC Challenges Tapestry's $8.5 Billion Acquisition of Capri Holdings

The Federal Trade Commission (FTC) has taken legal action to prevent Tapestry, Inc. from proceeding with its proposed $8.5 billion acquisition of Capri Holdings Limited. This deal would bring together three major competitors in the fashion industry: Tapestry’s Coach and Kate Spade brands, and Capri’s Michael Kors brand. According to the FTC, this merger would significantly reduce direct competition in the "accessible luxury" handbag market, which Tapestry describes as offering quality craftsmanship at an affordable price.

The FTC has issued an administrative complaint and authorized a federal lawsuit to block the acquisition, citing concerns that the merger would eliminate crucial competition that benefits consumers, including competitive pricing, discounts, promotions, and product innovation. The FTC argues that the merger could also harm employees by reducing competition for wages and workplace benefits, potentially affecting the combined entity’s 33,000 global employees.

Henry Liu, Director of the FTC’s Bureau of Competition, expressed concerns that the acquisition would reinforce Tapestry's position in the fashion industry, limiting competition for affordable luxury handbags and diminishing workplace conditions for hourly workers.

The complaint points out that Coach, Kate Spade, and Michael Kors brands actively monitor each other’s activities in the market to adjust their strategies, especially in pricing and product design. The FTC believes that the merger would not only give Tapestry a dominant market share but could also lead to higher prices for millions of American consumers.

Tapestry’s ongoing strategy of acquiring various fashion brands over the past decade indicates its ambition to establish a significant presence in the American fashion market. The FTC warns that the acquisition of Capri might not be Tapestry's final move, as it could provide Tapestry with even greater leverage for future acquisitions.

The FTC’s unanimous decision to seek a temporary restraining order and a preliminary injunction reflects serious concerns about the potential anti-competitive effects of the merger, emphasizing the need to maintain competition to benefit consumers and workers alike.

The 2024 Positive Luxury Awards Winners

The 2024 Positive Luxury Awards have been announced, celebrating luxury brands that lead in innovation and sustainability across various sectors. These awards recognize companies that have demonstrated exceptional commitment to environmental, social, and governance (ESG) standards over the past year.

The awards span multiple categories, including Beauty & Fragrance, Fashion & Accessories, Jewelry & Watches, Premium Drinks, Travel & Leisure, and Interiors & Living. An independent panel of experts, including academics and industry executives, judged the entries, looking for businesses that have made significant contributions to sustainability and set new industry standards.

Winners of the 2024 Positive Luxury Awards:

• Fashion Business of the Year: BAV TAiLOR stood out for achieving and inspiring higher ESG standards within the fashion and accessories sector.

• Beauty Business of the Year: MEDIK8 was recognized for transforming towards more sustainable practices and pioneering new standards in the beauty industry.

• Jewelry Business of the Year: MONICA VINADER was celebrated for its commitment to sustainability, ethical sourcing, and innovative design in the jewelry and watches category.

• Premium Drinks Business of the Year: CANNED WINE CO. was acknowledged for its responsible environmental and social impact, craftsmanship, and innovation in the luxury drinks industry.

• Interiors Business of the Year: ALLECT won for combining sustainability, creativity, quality, and craftsmanship in the interiors and living sector.

• Travel Business of the Year: SIX SENSES was commended for integrating sustainable practices that lead to higher standards across the business in the travel and leisure category.

• Responsible Business of the Year: SIX SENSES also took home this prestigious award, recognized for embedding sustainability into every aspect of its operations and demonstrating measurable positive impacts on nature, people, and profitability.

The Positive Luxury Awards aim to inspire other companies in the luxury sector to adopt similar practices and strive for higher sustainability standards, thereby driving real change for people and nature.

Thank you for supporting the world of luxury.