Decoding LVMH's stake in Stella McCartney

What some are already referring to as the latest battle of rival luxury groups Kering and LVMH, the latter's newly acquired stake in Stella McCartney came as a surprise to even the most connected industry insiders.

When McCartney bought back 50 percent of her brand from Kering in March this year, the terms of which were not disclosed, there was no suggestion of McCartney entering into business with the Louis Vuitton Group.

At the time, McCartney said in a statement: "It is the right moment to acquire full control of the company bearing my name. This opportunity represents a crucial patrimonial decision for me. I look forward to the next chapter of my life and what this brand and our team can achieve in the future.”

That next chapter, thus, involves selling a 10 percent stake to LVMH. Bernard Arnault, Chairman and CEO of LVMH, said in a statement: “I am extremely happy with this partnership with Stella. It is the beginning of a beautiful story together, and we are convinced of the great long-term potential of her House. A decisive factor was that she was the first to put sustainability and ethical issues on the front stage, very early on, and built her House around these issues. It emphasizes LVMH Groups’ commitment to sustainability."

While the New York Times called it a "plot twist in luxury wars," it noted McCartney's sales are not likely to have an impact on LVMH's long-term profits. Rather the investment would bring other gains, such as being a partial owner of a female-led company and the importance sustainability plays in LVMH's greater portfolio.