Tiffany Touts Operating Profits in LVMH Battle

Tiffany & Co. wants to prove LVMH Moët Hennessy Louis Vuitton is wrong about just how well the American company is navigating the COVID-19 storm.

The jeweler, locked in a legal battle to try to compel the French giant to go through with its $16.2 billion acquisition, said its business continued to bounce back in August and September.

Tiffany said in an expected update that its operating profits for the two months increased about 25 percent from a year earlier, including expenses related to the deal. Worldwide sales “declined slightly” compared with a year earlier.

“Positive sales trends are continuing in October,” the firm said.

Tiffany’s investors were encouraged and traded shares of the firm up 2.2 percent to $121.69 — although that is still significantly below the deal price of $135.

The company’s love story with LVMH has fallen apart during the pandemic and the would-be acquirer has argued in court that the Tiffany it wanted to buy “no longer exists,” that the business has been “mismanaged” and is “ill-suited for the challenges ahead.”

As part of its legal case for walking away from the deal, LVMH has argued that Tiffany’s performance tripped the “material adverse effect” clause in their contract — something Tiffany is pushing back against with its latest results.

Alessandro Bogliolo, chief executive officer of the company, said, “While we still expect full-year results to be substantially impacted by COVID-19, we are very pleased with the way the business has rebounded following the first quarter and continues to rebound in the third quarter, especially in mainland China, and to recover in the U.S.”

Like other businesses, Tiffany has been enjoying an e-commerce boost during the pandemic, with e-commerce sales nearly doubling year-over-year in August and September. So far this year, e-commerce has accounted for 13 percent of the firm’s sales, up from the run rate of about 6 percent.

In the U.S., where the business has been hit by a drop in tourism, sales fell by a percentage in the low-double digits over the last two months, which Tiffany noted “represents a meaningful sequential improvement since May 2020.”

Tiffany has argued that the Bernard Arnault-led LVMH is doing what it can to try to get out of the deal and bring the takeover price lower.

The case has become increasingly personal, with Tiffany targeting the luxury titan in its court filings.

“Mr. Arnault did not amass a personal fortune estimated at $77 billion, if not more, and earn a reputation for a ‘ruthless approach to acquisitions’ without a willingness to use every means and opportunity at his disposal to ensure that LVMH pays the lowest possible price for the assets he desires,” Tiffany said this week.

The gloves were already off, though. LVMH previously pointed to Bogliolo’s better than $44 million change of control payout should the deal go through and noted, “His golden parachute is equivalent to Tiffany’s losses in the first half of 2020.”

LVMH said that instead of big-time deal payouts, the company’s top executives now “face harsh realities and the shell of Tiffany’s former business.”

Both sides now face the reality of a trial date in early January, when a Delaware court judge will step in and take charge of the dispute.

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