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The rise of Bernard Arnault and his luxury empire


  • Overview of Bernard Arnault and his business empire
  • Growth and success of Bernard Arnault and his luxury empire LVMH

 

The Chairman and CEO of Moet Hennessy Louis Vuitton (LVMH), Bernard Arnault, often referred as the “Pope of fashion”, has built a multi-billion dollar luxury brand empire over the last three decades. Currently, his luxury brand portfolio consists of 70+ of some of the world’s best-known and high-end fashion brands and luxury branded hotels. Bernard owns the majority stake in LVMH through a complicated layer of entities and holding companies which resulted into him briefly joining the ultra-rarefied USD 100 billion club along with Jeff Bezos and Bill Gates in June 2019 when LVMH’s stock prices surged after good quarterly results. As of 14th August 2019, Bernard’s Net-worth stood over USD 97.6 billion.

Bernard Arnault’s journey to become “Pope of fashion”, started back in 1984, when he put USD 15 million of his family’s money to rescue the bankrupt textile Company “Boussac” which owned Christian Dior. Four years later he sold the Company’s other business and used the proceeds to buy a controlling stake in LVMH. The acquisition of these brands started the luxury brand portfolio building process. Under the leadership of Bernard Arnault, LVMH has multiplied more than 20 times in value since its inception, but Louis Vuitton and Christian Dior remain the cornerstone of success in LVMH’s massive luxury empire. The timeline for the house of LVMH is as impressive as it can be, wherein the first major entry for the company into the world of luxury started with the creation of LVMH in 1987, when Louis Vuitton became part of LVMH. This was followed by a series of mergers and acquisition while also conjugated with its fair share of controversies with some of the biggest luxury companies in the 1990s and 2000s.

The growth for Bernard Arnault and LVMH comes on the backdrop of rising high-end buyers across the globe for luxury goods and spirits over the years. The global luxury market, which has been growing consistently over the years registered a steady growth of 5% to an estimated USD 1.3 trillion in 2018. Europe remained the top region for luxury sales, followed by the Americas, Asia (including China), Japan and the rest of the world. Asia registered the highest growth with China contributing majorly to the growth backed by its growing purchasing power and greater access to luxury offerings. As per studies by Deloitte, when comparing the sales figures of the top 100 luxury companies in the world, the economic concentration of the top 10 luxury companies is approximately 50% of the total sales of the top 100 players. Of these the share for LVMH stands between 15%-20% of the top 100 luxury companies. The success of Bernard Arnault and his empire LVMH is a result of continued efforts to innovate and refresh LVMH and finding new ways to appeal to the new generation of customers while keeping the brand’s high quality intact. Bernard Arnault’s series of innovating strategies to keep his company relevant has also included the highly popular partnerships of LVMH with the very popular Fenty Beauty and Fenty fashion house by internationally acclaimed popstar and influencer Rihanna. Also, LVMH’s recent acquisition of the Belmond in a $3.2 billion deal to expand its portfolio to luxury hospitality added an extra layer to the brands offerings.

LVMH recently released their first half 2019 results, which stood better-than-expected and added to the overall optimism on the company’s share prices which have gained 45% between January 2019 and June 2019 (January was also an impressive month for the company’s share price, since the group announced record revenue numbers for the year 2018). LVMH’s revenue increased by 15% (YoY) during H1 2019 and also registered an organic revenue growth of 12% (YoY). By business group, the total revenue increased by 9% in wines and spirits, 21% in fashion and leather goods, 12% in perfumes and cosmetics, 8% in watches and jewelry, and 12% in selective retailing. The revenue growth was supported by favorable exchange rate, higher merchandise prices as well as growth in merchandise sales volumes. Among the geographies, Asia registered the highest growth with 33% (YoY) revenue growth during H1 2019, while United States and Europe also recorded healthy growth. The company’s focus on high quality with a combination of dynamism and creativity of its offerings enabled LVMH to pose such strong results.

Bernard Arnault’s empire was built on and heavily relies for growth on rapid acquisitions. He often has been criticized for trying to put multiple luxury brands (often competing with each other) under one roof.  –Though the strategy of rapid acquisition may become trickier going forward for Bernard Arnault’s LVMH  as the newer set of consumers prefer smaller, more niche brands and such brand owners prefer to stay independent as well; LVMH is working structurally on all areas to continue to growth. LVMH has big plans to ride the digital inclusion theme which is becoming a necessity even for luxury business. The company has hired Ian Rogers from Apple as its chief digital officer, who has also been the mastermind behind the giant luxury group’s innovation award. The company has also developed a platform called “Aura” that uses blockchain technology to track luxury goods and stop counterfeit products from entering the market. This platform is designed to offer powerful tracking services to brands as well as tracing options to their consumers, giving the customers access to details with regards to trends, designs, raw materials, manufacturing and distribution. With counterfeit being a major problem in the global luxury industry (multi-billion dollar worth of counterfeit goods are seized globally every year), these new initiatives will ensure authenticating the luxury goods. Going forward, another very important catalyst of growth for LVMH will be delivering high-quality products and modern designs to capitalize on the younger generation. Studies by companies such as Bain & Co. stated that generations Y and Z will represent approximately 55% of the 2025 luxury market and will contribute 130% of the overall growth between now and then. We feel LVMH and Bernard Arnault are here to stay, continuing with their thumping growth path over the medium to long term.

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