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Designers whose firms become part of big groups often continue to run companies on their own terms, though, which is often at odds with new shareholders seeking a return on their investment. "Also, to take some distance, when a designer sells his business, are you sure a designer wants his company to do better?" de Saint Pierre asked.
To be sure, the struggle of smaller, often loss-making brands has helped contribute to lesser growth prospects for the entire luxury industry, according to Michael Zaoui, managing director and chairman of mergers and acquisitions for Morgan Stanley in Europe. His calculations suggest that overall earnings growth prospects have been reduced by a third compared with what the market expected in 2000.
Other factors raining on luxury's parade include intense competition from fast-fashion retailers such as Zara and H&M, saturation of retail space for luxury in the West and growing pressure on margins as manufacturers are reluctant to raise prices further or move production to low-cost countries, he added.
One of the best solutions for conglomerates is to divest themselves of loss-making minor brands. However, Zaoui said there have been very few mergers and acquisitions in European luxury and that European private equity funds, extremely active in many other sectors, aren't participating.
"There are probably more sellers than buyers and sellers are not convinced by the prices in today's market," he said. "Sellers still want the multiples of 2000."
On the plus side, several observers say conglomerates, often guilty of applying the same formula to all their holdings, are wising up. Hence the selling off of some smaller brands.
"It's just not possible for a group to take that sort of approach," said Johann Rupert, Richemont's executive chairman. "Jewelry, watches, leather goods, textiles all have different distribution strategies and each require a different expertise. Watches are mostly wholesale, but Cartier jewelry is almost never sold wholesale. Textiles are a totally different story. These product categories are as different as wine, beer and Coca-Cola, and have to be treated individually."