Luxury giants flex their muscle to lock down prime window space

Luxury giants flex their muscle to lock down prime window space

PARIS - French luxury group LVMH is trying to push out smaller rivals from plush Place Vendome in Paris after buying one of its highest-profile buildings, illustrating the intensifying battle for Europe's prime retail locations.

Cash-rich groups such as LVMH, Richemont and Hermes have been stepping up property investment in key fashion capitals, buying entire buildings to lock in premium sites for which prices and rents are rising fast.

LVMH, owner of jewellers Fred and Chaumet and fashion label Louis Vuitton, had 3.2 billion euros (S$5.63 billion) of cash on its balance sheet at the end of last year and Cartier owner Richemont had 2.4 billion euros of disposable cash at March 31.

In the face of that kind of firepower, prime window space in the likes of Paris, London and Milan could be pushed beyond the means of smaller brands such as Buccellati, the family-run Italian jeweller favoured by aristocrats and Hollywood stars.

Buccellati says it has been asked by LVMH to vacate No.4 Place Vendome by the end of June, three years before the end of its lease. "This is our most important shop window," said Buccellati Chief Executive Thierry Andretta, adding that it had been renting the building, one of the most visible on the elegant 18th-century square, since 1979. "We will fight to stay," he said, adding that lawyers had been retained.

LVMH acquired the building for more than 200 million euros in 2011, based on market estimates, and says it is exercising its right to give notice if it is to refurbish the property."LVMH has until May to ask for a construction permit," a company spokeswoman said.

The group has already removed a small fashion boutique and antique jewellery shop from the building in the past year and has also asked Italian jeweller Damiani to leave when its lease runs out in 2016. "LVMH is asking us to leave, but we would like to stay as this shop is very strategic for us in terms of image and sales,"said Mario Gilardini, Damiani's head of worldwide sales.

RIVALS ECLIPSED

Damiani, Buccellati, Richard Mille and other tenants have already lost a degree of brand visibility on Place Vendome, their signage eclipsed by the huge advertisement for J'adore perfume - made by LVMH's Dior - now emblazoned across the building's scaffolding.

It is difficult to quantify returns on such properties because the investments are also aimed at preserving and nurturing a luxury brand's image, but they make an undeniably significant contribution to overall sales.

LVMH does not release figures for individual outlets, but Exane BNP Paribas analyst Luca Solca estimates that its Louis Vuitton store on the Champs Elysees has sales in line with a hypermarket, at 250-300 million euros a year, while other analysts say it could contribute 13-15 per cent of the brand's total sales in France.

But sales are only part of the equation. Real estate experts say that average rental values in the likes of Place Vendome in Paris, Bond Street and Knightsbridge in London and Via Montenapoleone in Milan have doubled in five years to between 12,000 and 15,000 euros per square metre.

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