“My first bunny” is a soft toy made of real rabbit hair with a polyester interior. It will set you back a mere £2,045. This is just one of the products made by Loro Piana – the Italian cashmere brand in which LVMH has just invested €2bn for an 80 per cent stake. LVMH chairman and chief executive Bernard Arnault really is living up to his nickname “the wolf in cashmere”.
With a market capitalisation of €67bn this is a bolt-on deal for the French luxury goods conglomerate that has been honing in on premium luxury (note LVMH’s battle over Hermès). And the price looks fair. Including debt, the enterprise value of €2.7bn values the Italian brand on 19 times this year’s earnings before interest, tax, depreciation and amortisation.
Granted that is steep when considering LVMH trades on a multiple of 10 times, and its peer group on 11 times. But then Loro Piana’s earnings are expected to grow by at least 18 per cent each year on average over the next two years – seven percentage points faster than the group, according to Morgan Stanley. Loro Piana’s closest peer Brunello Cucinelli trades on an EV/ebitda multiple of 20 times.