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Diamonds Are Not Only a Girl’s Best Friends

Most of us recall the famous Marilyn Monroe singing “Diamonds are the Girl’s Best Friends” in the movie by Howard Hawks “Gentlemen Preferer Blonds”. The trend for the diamond engagement rings is growing with the jewelry company marketing as an inseparable part of the lifelong commitment. “Breakfast at Tiffany’s” with Audrey Hapburn staring that made the Tiffany store at the 5th avenue in New York as the most iconic jewelry store. It became a destination place for all those looking for a unique souvenir.

In November of 2019 French luxury goods empire owner Bernard Arnault was a really good boy as he prepared for Christmas early, purchasing Tiffany & Co for $16.6 billion in cash. Thus, expanding his luxury goods empire Louis Vuitton Moët Hennessy (LVMH) with one more well-respected jewelry brand. Such an acquisition was due to the decreasing demand for high-end jewelry and, as a result, a decrease in sales for Tiffany & Co gradually losing the share of young customers. LVMH’s success with Bulgari, which since its 2011 acquisition has more than doubled its sales and tripled its margins, is a good indication for the recently acquired company. Therefore, LVMH believes to regain the popularity of Tiffany & Co, previous acquisition of the luxury goods empire proves to show an increase in sales.

Meanwhile, in Botswana, the mining company Lucara recovered 1,758-carat round diamond, the second-largest diamond in the century. Owner of the luxury goods empire, Bernard Arnault, has emerged as a surprise buyer. It seems that diamonds have become a kryptonite to Mr. Arnault, he cannot resist the temptation of owning one.

LVMH showed an uncut diamond during the close dinner with 80 guests during the couture shows in Paris. Purchasing uncut diamond holds a lot of risk as the surface of the diamond is still slicked with carbon to determine the best cut, a great deal of research is yet to be made. According to Michael Burke, chairman and chief executive of Louise Vuitton, “size is not everything”. The cut and clearness of the diamond, as well as the wish of the potential buyer, is what plays the key.

In the second quarter of 2019, LVMH reported revenues better than expected due to the increase in sales in Asia (excluding Japan). Sales rose by 12 percent to $12.5bn which was ahead of the Bloomberg’s analysts’ estimates of $12.3bl. But recently the luxury goods house faces a shortfall in the fourth quarter of 2019. The Hong Kong protests made its mark, reducing the demand in its largest customer China. Moreover, the outbreak of the coronavirus is of great threat to the companies’ revenues, as travel restrictions during the Chinese New Year shopping season will impede LVMH’s progress.

Bernard Arnault said it was “far too early” to gauge the impact.  In the article by Leila Abboud in the Financial Times from an interview with the chief executive of LVMH, he mentioned that “We can’t know at this stage what the outcome or duration will be of the epidemic,” he said. “The impact on the business won’t be too bad if it lasts two months but if it lasts two years that would be another story.”


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