company’s assets, earnings and revenues. This means that if Louis Vuitton
ever decides to sell its brand (which is highly unlikely, by the way), its brand
name and associations alone could fetch the company more than its book
price (its balance sheet worth). The case is similar with other ‘highly valued’
luxury fashion brands like Gucci, Armani and Rolex. In some cases, compa-
nies with strong brands are sold at up to 600 per cent of their balance sheet
worth.
The average company is valued by the stock-market at twice its net assets,
but companies with strong brands are valued at from 4–20 times their actual
physical assets. This additional valuation is often a result of recognition of the
intangible value assets of the brand and confidence in the long-term future
earning potential of the companies due to their brands. The large amount of
money companies with strong brands amass during mergers and acquisitions
is also evidence of the importance of branding as an asset. For example, in
March 2006 French cosmetics company L’Oréal offered to buy British brand
Body Shop for a price 34 per cent higher than its worth, as a result of its brand
value. Also, American high-end sportswear brand Tommy Hilfiger was
recently acquired by British investment company Apax for $1.6 billion, a
figure several times more than the company’s physical worth. In the non-
luxury fashion category, Nike bought sportswear company Converse for $305
million, a figure that far exceeded its book value. These indicators show the
importance of branding to any company that wants to make substantial long-
term financial returns.
A quick look at Table 5.1, which represents the most valuable luxury
brands in the world, according to Interbrand, previews the significance of the
business of branding. The values shown are solely attributable to the brands
and exclude the company’s assets and earnings.104
luxury fashion brandingTable 5.1 The Global Luxury Brand Value Scoreboard (2004–06)
Brand name Ranking Brand value, Brand value, Brand value, Country
2006 2005 2004 of origin
(US$ billion) (US$ billion) (US$ billion)
Louis Vuitton 1 17,606 16,077 6,60 France
Gucci 2 7,158 6,619 4,70 Italy
Chanel 3 5,156 4,778 4,416 France
Rolex 4 4,237 3,906 3,720
Switzerland
Hermès 5 3,854 3,540 3,376 France
Tiffany & Co. 6 3,819 3,618 3,638 USA
Cartier 7 3,360 3,050 2,749 France
Bvlgari 8 2,875 2,715 – Italy
Prada 9 2,874 2,760 2,568 Italy
Armani 10 2,783 2,677 2,613 Italy
Burberry 11 2,783 – – Britain
Source: http://www.interbrand.com