Bahrain's Investcorp has signed a $140 million deal to buy Danish luxury retailer Georg Jensen, despite signs the luxury market boom may be coming to an end. Georg Jensen "stands to become one of the leading hard luxury brands in the 21st century," Investcorp, which has previously held stakes in prestigious names including Gucci, Tiffany and Swiss watchmaker Breguet, said on Monday.
Founded by the eponymous Danish designer in 1904, Georg Jensen sells watches, jewelry and high-end houseware at 94 wholly-owned stores, from Europe and the U.S. to China, Taiwan Hong Kong and Japan. The company has 1,200 employees and generated sales of around $160 million last year.
Risky move in economically stressful times
The acquisition represents a bold and possibly risky move as other luxury brands appear to be succumbing finally to global economic malaise and financial turmoil. British fashion house Burberry Group BRBY.LN +0.73% PLC issued a profit warning in September due in large part to a slowdown in China. LVMH Moët Hennessy Louis Vuitton's MC.FR -0.08% revenue growth has slowed for the second consecutive quarter. Graff Diamonds, known for its 24-carat Graff Pink diamond, withdrew plans to list on the Hong Kong Stock Exchange in May.
Sales for luxury are falling in Europe as well
Back in Denmark, Pandora, a jewelry company that specializes in charm bracelets and positions itself as an affordable rather than luxury, has been struggling since it went public in 2010, and its chief executive resigned last year following a profit warning. Sales fell sharply when it tried to increase prices in response to a surge in the cost of gold and silver, at a time when consumers were becoming increasingly cost-conscious.
Global luxury sector still shows growth
The global luxury sector is still projected to grow 10% this year, according to consultancy Bain & Co. European growth is set to halve to 5%.One of the biggest challenges facing global luxury retailers in recent months has been slower Chinese sales growth, said Patrik Schwendimann, a consumer goods analyst at Zuercher Kantonalbank ZGLD.EB +0.45% .
Even Chinas development slows down
While Chinese tourists continue to buy goods in Europe, sales growth back in their home country hasn't been as strong as it once was. "China sooner or later had to have a real slowdown after this fantastic growth over the past couple of years," said Mr. Schwendimann. "When you're growing 30% to 40%, that's not sustainable in the long term. That's what happened in the past couple of months, when sales growth came down."
New board members will take over after the deal
David Chu, founder of clothing brand Nautica, will join the company as chief creative director and co-chairman of the board, while Guy Leymarie, the former chief executive of DeBeers Diamond Jewellers, Cartier International and Dunhill, will also join the board after the deal closes.
