Byline: Robert Murphy / Jennifer Weil, Paris

PARIS — Could luxury giant LVMH Moet Hennessy Louis Vuitton hold a shareholders’ meeting and not disclose a fresh acquisition?
Of course not.
Acquisitive LVMH chief Bernard Arnault announced Wednesday the purchase of a majority stake in Omas, a high-end Italian writing instruments company during back-to-back LVMH and Christian Dior conferences.
“Omas is exactly the type of company we’re interested in acquiring,” Arnault said. “As a brand, it has a respected image and product, but its sales are underdeveloped.”
In a statement, LVMH group managing director Mike Ullman characterized the Omas acquisition as an “important addition to our growing portfolio of luxury watches, jewelry, writing instruments and other personal accessories+ This company clearly has tremendous potential for global growth.”
The purchase price for the 75-year-old Milan-based company was not disclosed. The firm posted sales of $5.5 million last year. The statement said the Simoni Malaguti family will retain a minority stake. It also said Gianluca Malaguti, a grandson of Omas’s founder, will remain as chief executive officer.
Arnault said Omas’s products will be particularly well-suited for sale on, LVMH’s new luxury products portal that is scheduled to go live next month. Arnault then segued into a discussion of his current passion: the Internet.
Arnault dedicated a full third of the LVMH shareholder meeting to the company’s cyber strategy. “Our objective is to become the leader in the selective Internet business,” he said, explaining that by “selective Internet” he means economically sound e-ventures.
“There’s been talk about the so-called New Economy and its potential, but for any business to succeed it must be based on traditional economic values,” he said, adding that the most impactful Web ventures will be those backed by strong brands with proven track records in brick-and-mortar stores.
“It’s very difficult to build a virtual brand,” Arnault said, citing as an exception. “I think Amazon will continue to thrive because they got into the game very early, aggressively expanded and invested heavily. But now, I think the edge will go to companies with a strong brand and immediate recognition. That’s where our strength lies.”
He was referring in particular to, which went up in October 1999, and Eluxury, which he expects will draw from the group’s estimated 20 million worldwide clients as soon as it is open to the public.
Shareholders voiced concern that in selling luxury goods online, LVMH risks cannibalizing its own brands in store. Arnault argued that the environment around cyber-sales can be made to differ vastly from ones on luxury shopping streets. “We avoid damaging a brand by offering unique services on our site,” he said, highlighting Eluxury’s gift-planning service and even same-day delivery, for instance. “These are services that are not easy to provide in a traditional venue.”
He also explained the Internet allows a company to reach consumers in more remote areas at a low cost — since overheads on virtual stores are lower than on real ones — while concentrating budgets on urban stores.
“Internet is a great tool when used properly,” he said. As an example, he cited British shirtmaker Thomas Pink, which was acquired by LVMH last September and is already generating 20 percent of its business online. Arnault asserted that “over the long term,” the Internet will be a moneymaker for LVMH.
A current profitable venture is Christian Dior, which is the company through which Arnault controls LVMH. Dior registered sales of $244.1 million last year, up 9.8 percent over 1998. Company president Sidney Toledano attributed the company’s strong performance to the successful introduction of new products, the opening of new boutiques, and southeast Asia’s economic rebound. Toledano stressed the rise was mostly generated in the fourth quarter, when sales jumped 31 percent. This is compared to the 8 percent gain posted in the third quarter; the 4 percent increase in the second quarter, and the 4 percent decline in the first quarter.
“With sales on the upward swing, we’re very confident in our outlook for this year,” Toledano said. To bolster growth, Dior will concentrate on developing its men’s fashion collection and its women’s shoe line, he said. To that end, Dior designer John Galliano is bringing together a team that will aggressively expand the shoe business. “Women’s shoes hold enormous potential,” Toledano said, adding that the company will also focus on opening new boutiques.
“We’re planning to invest more than $13.8 million in new boutiques this year,” said Toledano. “This year, we will open 20 new shops, which will bring the total up to 95 Dior locations by the end of 2000.”
The subject of Gucci came up at the meeting. A relic of its failed bid to acquire Gucci last year, which it lost to rival Pinault-Printemps-Redoute, LVMH still holds 20 percent of Gucci’s stock. LVMH is petitioning the Amsterdam District Court to order PPR to make a public offer for all Gucci shares. Arnault said he is “confident” the court will rule in his favor. “We contest the manner in which we became minority shareholders of Gucci,” Arnault said with a sigh. “Our holdings in Gucci are not a long-term strategic investment.”
Questions also were raised regarding Arnault’s recent move to reduce LVMH’s stake in liquor company Diageo.
As reported, LVMH slashed its stake in Diageo to about 3 percent from 8.5 percent Monday by selling 134 million shares at about $8.20 each. Rumors abound that the company did so to rebuild a war chest for additional acquisitions — in particular, the luxury watch brands Jaeger-LeCoultre, IWC Schaffhausen and A. Lang & Sohne, belonging to German conglomerate Mannesmann AG.
But when Arnault was asked outright whether that is his intent, he simply said: “We get sent all the dossiers on the market. We only are interested in acquiring companies at reasonable prices which have a strong capacity for development over the long term.”
LVMH shares closed Wednesday up 0.2 percent at $524.50 on the Paris bourse, while Dior’s were down 1.59 percent at $317.30.