Despite recent “rumors,” LVMH Moët Hennessy Louis Vuitton says that it will not opt to buy Tiffany & Co. shares on the open market in order to snap up ownership of the jewelry company for less than the $16.2 billion price the parties agreed upon in November. According to a statement that the Paris-based luxury goods group issued on Monday morning, reports that it was potentially looking to buy Tiffany & Co.’s stock on the open market amid a coronavirus-driven slump have lead it to confirming that it “is currently committed not to buy Tiffany shares [on the open market] … in accordance with the [November] agreement.”

Bloomberg reported last week that “people familiar with the matter” revealed that LVMH had “discussed the idea” of purchasing shares on the market with Tiffany’s board, “which could grant permission for the potential purchases to go ahead after earnings,” while noting that LVMH had “not made a final decision on whether to proceed with selective market buying and is discussing possible legal hurdles to the idea.”

The “unusual step,” as Bloomberg characterized it, which comes as the iconic New York-based jewelry brand’s NYSE-listed shares are selling for less than the agreed-upon takeover price, would have enabled the Paris-based group to capture “a near 13 percent discount at recent prices.” Although, it would also “underscore LVMH Chief Executive Officer Bernard Arnault’s commitment to the deal.”

Bloomberg’s Andrea Felsted stated in a separate article over the weekend that that “Tiffany’s stock price [has been] supported by the $135-a-share [deal with LVMH], but touched a year-to-date low of about $111 this [past] week.” Such a “large spread suggests an element of uncertainty the deal will actually close.” While financing the deal in light of the market downturn should not be an issue, Felsted says “the question is whether there is any provision in the fine print of the deal agreement that LVMH lawyers could use to walk away — and whether Arnault would even want to if there was.”

“Wriggling off the hook,” she writes, “would damage Arnault’s reputation” – although it is worth noting that Arnault is known as an aggressive and even ruthless business builder, hence his “‘wolf-in-cashmere clothing” industry nickname, thanks to various hostile takeover attempts in the past, including his group’s (unsuccessful) play for Gucci. It would also “send a terrible message to investors about the strength of LVMH,” which seemed to support reports that the richest man in fashion was looking for other ways “to try to bring down the overall cost of the deal, without trying to renegotiate, or pressing the panic button.” 

LVMH’s full statement reads as follows: “Rumors circulated recently indicating that LVMH would consider buying Tiffany shares on the open market. These rumors lead LVMH to recall that, in accordance with the agreement concluded with Tiffany in November 2019, LVMH is currently committed not to buy Tiffany shares.” 

“Taking into account the progression of COVID-19 in all of its key markets and the impact on the activity of its Houses,” Kering estimates that consolidated revenue for the first quarter of 2020, ending March 31, will be down by between 13 percent and 14 percent in reported terms (approximately 15 percent in comparable terms) compared to the first quarter of 2019. The Paris-based group, which owns Gucci, Saint Laurent, Balenciaga, and Bottega Veneta, among other luxury brands, says it expects “sharp” impacts for the second quarter, as well, as consumer opt out of luxury spending amidst the global health crisis.  

In a statement released on Friday, “Initial Estimate Of COVID-19 Epidemic Impact,” Kering reveals that it is currently “observing encouraging signs in Mainland China, where the decline in store traffic, and hence in sales, is narrowing” in light of the initial drop as tied to the start of the coronavirus outbreak earlier this year. Conversely, the group states, “the impact of the epidemic remains significant in other Asia Pacific markets, and the situation has substantially deteriorated in recent weeks in Western Europe and, more recently, North America.” 

As for second quarter of the year, Kering says that it expects “revenue [to be] sharply impacted by the effect of the epidemic on local clienteles and tourism,” while it estimates that taken together, the “first half of 2020 [will see] recurring operating margin in decline,” but could not comment further, noting “the dynamic nature of the situation and the current lack of visibility.” (Kering will release its first quarter 2020 revenue on April 21).

Against this background, Kering – which generated more than $17 billion in 2019 (up 13.3 percent compared to its full year results for 2018) – says that it “has implemented an initial action plan aimed at adapting its cost base and containing its working capital requirement,” and is “currently considering additional measures that can be activated to mitigate the dilution of its recurring operating margin throughout the year, while protecting its Houses’ market positions and preserving their growth potential and capacity to bounce back in the short and medium term.”

Ultimately, “the epidemic does not call into question the structural drivers of the Luxury industry,” per Kering, which says that the “strength of [its] business model and organization, as well as its financial health and discipline, reinforce the Group’s confidence in its medium- and long-term growth prospects.” 

Meanwhile, elsewhere in the luxury segment, Burberry revealed this week that it expects sales in the final weeks of March to fall by as much as 80 percent, per CNBC, with “like-for-like sales in the final weeks of its financial year to March 28 would be down 70 to 80 percent, and as a result fourth-quarter sales would be 30 percent lower.” The British brand did, however, stated that sales in China have begun to improve in recent weeks, as shops there have started to reopen.

In what is proving to be an increasingly difficult climate for businesses no matter the industry, the fashion and luxury markets are being hit particularly hard by the spread of COVID-19, as brands are being forced to “indefinitely” shutter their brick-and-mortar outposts, and consumers are opting to focus more centrally on purchases of essentials while they observe the travel bans and social distancing mandates that are being rolled out in cities across the globe. The impacts of this are sweeping, with investment research and management consultancy Bernstein predicting that the first half of 2020 is “likely going to be the worst in the history of the modern luxury goods industry,” per Quartz, as the novel virus poses a challenge that is “even greater than the 2008 recession.” 

With revenue losses estimated to reach $32 to $43 billion in 2020 as a result of the enduring spread of COVID-19, and heightening uncertainty about travel and retail operations more generally that comes along with it, New York-based luxury goods-centric consulting firm, the Luxury Institute, reached out to all members of its Global Luxury Expert Network – the largest global network of luxury executives and experts in the world – to gauge what brands are thinking about and what they are planning for in light of the continued spread of the virus.

Some of the Most Significant Impacts of COVID-19 on Fashion and Luxury Brands

The Luxury Institute‘s Global Luxury Expert Network members, who “operate at the front lines of the global luxury industry,” according to the consultancy, proposed an array of concerns and potential impacts that they suggest will be some of the most significant in connection with COVID-19. These include …

1. The Chinese consumer, which is responsible for some 35 percent of global luxury sales and more than 80 percent of the growth in this segment of the market, has been shaken and economically hit hard by these events. It remains to be seen if they will continue to be the engine of growth for the luxury industry, and/or if their values and purchasing habits will change. 

2. Affluent consumers’ fears and uncertainty related to their personal and loved ones’ health will be exacerbated by massive stock market losses that will generate a near-term sense of financial loss. These losses will cause affluent consumers, as well as mass market consumers who buy luxury periodically, to pull back sharply on spending, at least in the medium term. 

3. The inability to travel will dramatically affect airlines, luxury and premium travel and tourism, brands’ rising focus on travel retail, global conferences and events, and the entertainment and sports industries most. This will last for several months. 

4. Luxury goods supply chains will be affected by Chinese and European dislocations. They will be fixed (as we are already seeing to a large extent in china), but a major loss has already taken place and will reverberate for months. Alternative supply chains will be seriously considered. 

5. The impact on the global fashion/luxury workforce will be severe unless governments and brands step up to protect these members of the industry. 

6. Digital capabilities and skills are very important right now and will become even more so in the long-term. It remains to be seen if luxury consumers will revive their appetite for in-store experiences at the same levels as pre-crisis, which were somewhat declining in any case. Some experts think that most of whatever can be done online will, in fact, be done online in the future. 

7. Many uber-wealthy consumers have escaped the major cities to secondary enclaves and are hunkering down and assessing various elements of their lives. It remains to be seen how they will be affected, but no one is expected to escape the mental and behavioral effects of the transformation.

Changes We Can Expect as a Result of This Pandemic

It is difficult to predict how the crisis will rewire the needs and wants of all luxury consumers and brands, alike, but as in all major crises in history, there will be long-lasting effects in perceptions and behaviors. Members recognize that predicting the future is a futile exercise for the most part. Here are some areas of question that Global Luxury Expert Network members believe will be considered and/or reconsidered by affluent consumers and brands in light of the pandemic …

1. The marketing of sustainability as a brand badge vs. the need to fully address true sustainability. When will the window dressing stop and when will companies get serious about implementation? 

2. With all the fake “authenticity” that abounds in luxury and premium offerings, where will consumers turn to for the true authenticity and safety that they crave and need? 

3. What will change in terms of the ways that luxury clients choose to engage with brands? Will they now only engage seriously with brands that share and prove their humanistic values? 

4. Will luxury brands continue to engage in mass production to grow at all costs, and will there be new true niche luxury brands that emerge as winners? 

5. How will Millennials and Gen-Zs emerge from the crisis economically, and what will be their mindsets with regard to luxury? Will these be long-term effects or short-lived? 

6. Will the pandemic delay, or accelerate, the global generational wealth transfer? 

7. Will clients insist upon transparent supply chains, and truly support locally-sourced products and services? 

8. How will luxury travel attitudes and habits change as a result of the pandemic? 

9. Will the uber-wealthy and wealthy again more strongly seek to alienate themselves from others such as in private clubs and communities, as was more common in the past? 

10. Will luxury brands retreat from third-party retailers and choose to build direct and exclusive client relationships? 

The COVID-19 virus is officially has reached pandemic heights, sending stock markets across the globe into a flurry of volatility, and prompting government action in the form of strict travel restrictions, border closures, and stimulus packages. Some industries are struggling with a lack of supply (and in certain cases, a surge in demand), while others are being forced to close up shop, and send workers home for the foreseeable future, many without any benefits for their time off the clock. 

Despite the significant and growing plight of employees in the U.S. and other Western nations in light of the severity of the coronavirus, some of the most vulnerable individuals from an economic perspective are those we cannot see, according to Martijn Boersma, a senior lecturer at the University of Technology in Sydney, and Justine Nolan a professor of law at UNSW Sydney. The academics point to the 20,000 garment workers in Cambodia, who are currently facing job losses from factory closures because of shortages of raw materials from China and reduced orders from buyers in virus-affected locations, including the United States and Europe. 

Meanwhile, “Thousands have already lost their jobs in Myanmar,” they state, and “garment workers in Sri Lanka and Bangladesh are similarly uncertain” about the future of their employment. This indeterminate reality is shared by “factory workers in Bangladesh could go hungry as global fashion brands have canceled or delayed orders worth $138 million due to coronavirus,” Reuters reported on Thursday. 

According to the publication, “More than 100 Bangladeshi factories have already lost orders, manufacturers said, as retail sales plummeted globally and giants like Zara owner Inditex and H&M temporarily closed stores in Europe – the current epicenter of the flu-like virus,” with U.S. operations expected to follow, as cities like New York and Los Angeles observe mandates of “social distancing” to help slow the spread of the novel virus. 

Bangladesh, which is the second largest exporter of garments in the world after China, “is heavily-reliant on top fashion brands, employing more than 4 million people, mostly women, and accounts for more than 80 percent of its exports.” This is why Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, a Dhaka-based trade group with more than 4,000 garment manufacturer members, is urging brands “to continue taking our orders until June, and to support us in any form so that the workers don’t go hungry.” 

“These workers live hand-to-mouth and they are panicked because they have heard that orders are being canceled,” Kalpona Akter, founder of the Bangladesh Centre for Worker Solidarity, told Reuters. 

With so many jobs on the line, Boersma and Nolan say they fear that working conditions risk quickly deteriorating at the hands of unscrupulous employers, particularly as worker desperation rises. “This can result in modern slavery, including situations of forced labor,” they state, noting the already-precarious conditions that are regularly created when “purchasing practices [by large apparel companies] put extreme pressure on suppliers [by way of] extremely tight production windows, short-term contracts, last-minute or short-term orders and severe payment terms.” 

“A global economic crisis,” such as the continued spread of COVID-19 and the severe economic implications that with it, “might make these conditions worse,” the academics assert. As such, “it is vital that companies engage and collaborate with others, including suppliers, workers and the public in order to understand how best to address these risks,” and that Western giants – whether it be Apple and Amazon or Zara and H&M – “drill down beyond their direct suppliers” and to the extent possible, “consider not only risks to their [immediate] businesses, but also the risks their businesses pose to others, including their indirect employees.”

This past summer in an attempt to sell a collection of orange and blue accented Nike sneakers – from the Beaverton, Oregon-based brand’s React Presto to its Air Max styles – in more than 500 stores across the U.S., Champs looked to “the most important and influential” surfing films of all time for inspiration. What was born was a campaign called “Endless Summer,” complete with posters and social media promotions that featured Nike’s name alongside a graphic of a “stylized blue wave with a large orange sun.” 

In both name and design, the campaign was a clear take on the seminal 1966 film, The Endless Summer. The problem with that, according to Bruce Brown Films, LLC, the company founded by The Endless Summer filmmaker Bruce Brown, and tasked with merchandising and licensing the intellectual property of the Endless Summer film and its iconic posters? Neither Nike nor Champs licensed the trademark-protected “Endless Summer” name or the trade dress-protected graphics – namely, “a series of stylized blue waves with a large orange sun” – associated with it before they launched their nation-wide campaign. 

With that in mind, Bruce Brown Films filed suit against Nike, Champs, and Champs’ parent company Footlocker in a federal court in California this week, accusing the sportswear entities of “knowingly” and “impermissibly trad[ing] on the fame and goodwill associated with [the Endless Summer] intellectual property in [their] unauthorized use” of Bruce Brown Films’ trademarks. 

According to Bruce Brown Films’ complaint, “Beginning in or about May 2019 until August 2019, Champs and Nike used [its] Endless Summer trademark along with distinctive elements of [its] Endless Summer poster image to conduct a sales promotion relating to Nike shoes offered by Champs through its website and in all 529 Champs retail stores throughout the U.S.” 

Bruce Brown Films (left) & Nike/Champs (right)

Despite being put on notice of such alleged infringement by way of the cease and desist letter that counsel for Bruce Brown Films sent to Champs, demanding that they cease their use of the trademarks, the defendants “continued their infringing conduct,” nonetheless, Bruce Brown Films asserts.

In addition to maintaining rights in the Endless Summer film, itself, Bruce Brown Films claims that it oversees that “Endless Summer Brand,” which “continues to be a highly profitable property for purposes of licensing goods and services” more than 50 years after the film was first released. As a result of various licensing deals, “many different products featuring Endless Summer Brand are available to the public, including, apparel and accessories.” And beyond that, it has also licensed “the use of the Endless Summer brands in connection with promotional and media uses, including retail services and media promotion rights.”

Given the existing market for licensed products bearing the Endless Summer name and relevant graphics, Nike and Champs not only “traded off the goodwill associated with The Endless Summer by using the Endless Summer Brand in connection with sales and offers to sell shoes and other goods … in direct competition with [Bruce Brown Films],” they used the mark in a manner that “is likely to confuse consumers as to [Bruce Brown Films’] authorization, association with or endorsement of [their] goods, retail stores and online stores,” thereby, running afoul of trademark law. 

As a result, Bruce Brown Films sets forth claims of trademark infringement and dilution, as well as unfair competition, and is seeking monetary damages and injunctive relief to bar Champs and Nike from engaging in further infringing acts, all while pitting itself against the $135 billion behemoth that is Nike. 

*The case is Bruce Brown Films, LLC v. FootLocker Inc et al, 2:20-cv-02553 (C.D. Cal.).