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Faced with the Covid-19 pandemic, luxury companies must adapt to a new context of economic crisis. Postponement of payments, suspension of dividends, restrictions, redistributions: they do not all make the same choices to preserve themselves and protect their cash flow. Overview of major luxury groups’ decisions with regard to their shareholders.
To pay or not to pay dividends, that is the question of the boards of directors of the large luxury companies in the midst of the Covid-19 epidemic. Hermès, Accor, EssilorLuxoticca, etc. Hermès, Accor, Essilor-Luxoticca, etc.: each is taking its own initiative by proposing deferred payments, reductions or even cancellations, while others are abstaining.
Although the Minister of the Economy Bruno Le Maire called on the major groups at the end of March to show responsibility and moderation in the payment of dividends, several of them have already sacrificed the remuneration of their shareholders.
This is the case of the hotel group Accor, which announced on Thursday 2 April new “drastic” cost-cutting measures and the cancellation of its dividend for the 2019 financial year in order to deal with the economic consequences of the coronavirus epidemic.
However, the group has promised to make 25% of the dividends initially planned available to its employees most in difficulty: “When we realised that in some of the countries, employees in some countries had 20% of their salary (…) we convinced the Board of Directors, our major shareholders, not only not to pay the dividend but to ensure that 25% of the dividend that should have been paid, i.e. 70 million euros, was set aside to help them“. explained CEO Sébastien Bazin.
This is also the case of the Italian fashion group Tod’s which, in view of the deterioration of the Covid-19 global epidemic scenario, decided, following a board of directors meeting held on 30 March last under emergency procedure, not to pay dividends for the 2019 financial year, whereas the Italian company had already approved on 12 March the distribution of a dividend of 60 cents per share for an equivalent value of nearly 20 million euros.
The brothers Diego and Andrea Della Vella, respectively Chairman and Vice-Chairman of the group, also announced that they would waive their compensation for 2020, i.e. 1.8 and 1.3 million of euros of remuneration.
For its part, the French luxury goods group Hermès reduced the dividend it intended to pay to 4.55 euros per share, compared with the 5 euros initially planned, i.e. the level for 2019. However, on Monday 30 March, the group said it “has sufficient cash” to face the crisis, also stating that it would maintain the basic salary of its 15,500 employees in France and worldwide “without having recourse to exceptional public aid from the various States“, including short-time work arrangements in France, despite the suspension of all its production sites.
In addition, Hermès will refrain from increasing the salaries of its senior executives in 2020.
After much hesitation, LVMH, the world leader in the luxury industry, also came out on Thursday 16 March favouring a restriction on remuneration and a reduction in the dividend payment to shareholders. Bernard Arnault, its CEO, announced that he would waive part of his salary, while a 30% reduction in the dividend for the 210 financial year will be proposed at the next general meeting on 30 June, bringing it to 4.80 euros.
Similarly, the French-Italian company EssilorLuxottica, which after announcing last month its intention to pay a dividend of €2.23 per share, finally announced on Monday 20 April in a press release that it would not be submitting a dividend distribution for the 2019 financial year at its Annual General Meeting on 25 June, at a time when its business is being disrupted by the coronavirus pandemic. However, the corrective lens and optical instrument company has indicated that its Board of Directors could propose the payout of a special dividend before the end of the year if the recovery proves to be “sufficiently robust“.
EssilorLuxottica’s Board of Directors has also asked the management team to reduce the Company’s operating and cash costs, including by reducing or deferring a portion of executive compensation. The latter measure will apply to Board members, who will see their compensation reduced by 50%.
At the same time, a wind of uncertainty is still blowing over some large companies that still lack sufficient visibility to confirm their previous objectives.
The suspense thus remains for cosmetics giant L’Oréal, which announced on March 30 that it would “maintain 100% employment and salaries, zero short-time working, and no deferral of expenses. But while the global cosmetics market, and in particular the beauty market, has contracted by 8% in the first quarter of 2020 and this trend is likely to worsen despite an “encouraging recovery” in China, Jean-Paul Agon, L’Oréal’s CEO, made a statement on Thursday April 16 to declare that the board would meet in May to decide on its position regarding the dividend policy.
Suspense and indecision remain for the Kering group, which is postponing its shareholding operations while waiting for further clarifications. The luxury group will very soon be publishing its turnover for the first quarter of 2020. However, François-Henri Pinault, its CEO, confessed that he would reduce his remuneration by 25% for the year 2020.
New remuneration policies, revision of salary provisions, luxury groups have to take complex decisions to survive in the face of an unparalleled crisis, even if it means compromising their commitments to their shareholders.
Read also> Coronavirus: Government announces business support measures
Featured photo: © Ministère de l’Économie et des Finances, de l’Action et des Comptes publics
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Faced with the Covid-19 pandemic, luxury companies must adapt to a new context of economic crisis. Postponement of payments, suspension of dividends, restrictions, redistributions: they do not all make the same choices to preserve themselves and protect their cash flow. Overview of major luxury groups’ decisions with regard to their shareholders.
To pay or not to pay dividends, that is the question of the boards of directors of the large luxury companies in the midst of the Covid-19 epidemic. Hermès, Accor, EssilorLuxoticca, etc. Hermès, Accor, Essilor-Luxoticca, etc.: each is taking its own initiative by proposing deferred payments, reductions or even cancellations, while others are abstaining.
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Faced with the Covid-19 pandemic, luxury companies must adapt to a new context of economic crisis. Postponement of payments, suspension of dividends, restrictions, redistributions: they do not all make the same choices to preserve themselves and protect their cash flow. Overview of major luxury groups’ decisions with regard to their shareholders.
To pay or not to pay dividends, that is the question of the boards of directors of the large luxury companies in the midst of the Covid-19 epidemic. Hermès, Accor, EssilorLuxoticca, etc. Hermès, Accor, Essilor-Luxoticca, etc.: each is taking its own initiative by proposing deferred payments, reductions or even cancellations, while others are abstaining.
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