The Tiffany's and Louis Vuitton Engagement Will Take Longer Than Anticipated

Almost eight months after French luxury goods giant LVMH Moet Hennessy Louis Vuitton SA LVMH and U.S. jewelry chain Tiffany & Co. TIF announced their engagement, Reuters reported that the formal tie-up will be pushed back three months. Tiffany decided to exercise its right to move the deadline to November 24. As a reminder, LVMH will pay $16.9 Billion including net debt, equivalent to nearly four years' sales at Tiffany, its biggest and most expensive deal to date. But this is more than a prolonged engagement, it is a snapshot of a new economy where the list of priorities is being rewritten.

Could This "Marriage" End Up Not Taking Place?

Tiffany's shareholders said yes to the proposal in February. But, at least a few key regulatory bodies, including the relevant entities in the European Union, Japan, Mexico, and Taiwan, have not yet approved the transaction. If its prior Bulgari approval is any indication, it seems feasible that the European Commission will approve the Tiffany deal. However, the pandemic is adding up to a sobering challenge for U.S. antitrust enforcers. It is worsening the already burning problems of rising concentration and declining competition that regulators were already trying to address before the outbreak. The big ones are only getting bigger and the small ones are fighting for dear life.

COVID-19 Altered Consumer Behavior

Like with any crisis, the pandemic is playing to the strengths of the biggest players. In the case of COVID-19, the winners are the digital players. Their victory was clearly reflected in their earnings reports. Big Tech saw its stock reach new highs and exceeded top-line expectations. Amazon.com, Inc. AMZN even did the impossible as it topped profit expectations. Microsoft Corporation MSFT and Zoom Video Communications ZM saw engagement skyrocket to unprecedented highs. New trends are being made.

Altogether, the pandemic could reshape the American economy in myriad ways as companies begin to wobble, and corporate defaults begin to soar. Moreover, just like COVID-19 relentlessly marched across the globe, the fallout won't be limited to the U.S. economy. Jean-Paul Agon, the chairman of French cosmetics giant L'Oréal SA LRLCYLRLCF, warned of that possibility back in April, saying it is simply the Darwinian side of business. But rest assured, L'Oréal is one of those which can survive this storm and adopt to a new definition of beauty. Even the lipstick index that survived the Great Depression and the 2008 Financial Crisis met its match. Masks turned skincare into a blockbuster as quarantines provided more time for self-care. With COVID-19 still around, beauty is being redefined as "clean" and "antibacterial" become the desired adjectives.

COVID Or No COVID, Industry Consolidation Is In The Cards

Such consolidation was well-underway within the fashion industry even before COVID put the world to a stop. The trend was heightened largely by the fact that titans were only gaining in size and power, making it increasingly difficult for anyone else to compete. A pattern of smaller players or more precisely, single-brand players, coming together to seek refuge from the giants could be observed even before the pandemic. This has ultimately prompted the general consensus that it is better to be big. The Economist even defined it last year by saying that brands can simply do better with a conglomerate behind them.

COVID-19 Will Reshape The Luxury Industry

The iconic American marque which is much more than a luxury jeweler will become the 76th Maison of the Parisian group which holds Louis Vuitton, Dior and Veuve Clicquot champagne under its umbrella. With LVMH being the world's largest luxury goods conglomerate, the only question is how many more can fit under the corporate umbrella of Bernard Arnault, its CEO and biggest shareholder? But even the mightiest fell under the sword of COVID-19 as international tourism is largely halted and potential buyers are cutting back on luxury purchases. Its revenue fell 38% in the three months up to the end of June. Just like with Richemont and Burberry, it was the worst ever quarter that was eaten up by the pandemic.  But, the giant's revenue showed relative resilience during the first half of the year with improvements expected since July. The biggest potential problem for the industry is its reliance on physical stores as it has been notoriously slow in picking up on the online buying trend.

Gloomy Outlook

Welcome to the post-pandemic U.S. economy. The biggest companies are getting even bigger. Midsize players are running on fumes. Brick-and-mortar stores are struggling just to make ends meet. Startups are disappearing. It can be argued that they are even more important than luxury "Gods," considering they are the building blocks of a competitive economy.

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