Since the beginning of the COVID-19 pandemic, all eyes have been on Bernard Arnault, Europe’s wealthiest man. For brief moments over the preceding months, the luxury-goods magnate topped Jeff Bezos as the richest man in the world with an estimated net worth of more than US$100 billion.
However, by May, that figure plummeted by US$30 billion after shares in his company, LVMH Moët Hennessy – Louis Vuitton SE, plunged by 19%, largely because people are no longer shopping for Fendi handbags or Bulgari watches amid a global economic downturn. Business publications quipped that Arnault has lost as much money as Bezos has gained since the start of the crisis.
Strikingly, however, no analysis of the straits Arnault finds himself in contains any trace of pity or schadenfreude. Why? Because it is well understood that nothing, not even a global pandemic or an economic recession, can stop him from expanding, influencing and creating. Arnault, 71, oversees a luxury empire of 70-plus brands divided into six sectors, offering the world’s most coveted wines, perfumes and leather goods.
He is often referred to as ‘the wolf in cashmere’ because of his ruthless drive for growth and seemingly wanton embrace of big risks. When LVMH’s competitors exercise caution, Arnault pushes his organisation into the future with massive, audacious investments.
“I’m not that interested in the numbers of the next six months – what I am interested in is that the desire for the brand will be the same in 10 years as it is today.” – Bernard Arnault
For example, even today, he is orchestrating an aggressive expansion plan that will see the reopening of the Samaritaine department store in Paris as a duty-free shopping hub and luxury hotel, as well as the construction of a Cheval Blanc luxury hotel on Los Angeles’ Rodeo Drive.
He has also committed to completing LVMH’s US$16 billion takeover of Tiffany & Co. this year. Givenchy, one of the dozens of prestige brands under the LVMH umbrella, has gone ahead with recruiting a new designer and is planning an aesthetic overhaul to be ready for a potential September fashion show, even if social distancing policies preclude the attendance of a live audience.
On top of these expansions, LVMH has also reconfigured its French factories to crank out 60 tonnes of protective masks and hand sanitiser per week since mid-March to help meet local demand for protective equipment.
So what gives Arnault the confidence to push ahead during a time when other executives have their tails between their legs? The explanation lies in the story of his first foray into the luxury arena more than 30 years ago.
Fascination with Dior
After graduating in 1971 from the École Polytechnique, France’s leading engineering school, a young Arnault began work for his father’s construction company, Ferret-Savinel (now Férinel).
“My father was really exceptional because he always gave me a sense of business, and when I arrived in the business with him, after three years, he told me, ‘I think you are able to run the business, so let’s do it,’” Arnault recalls, smiling.
“He gave me the key. I was 25, and I was running a small business – only 1,000 people. It was risky for him because it was a business he built over his entire life.” That risk was promptly followed by another.
In his 20s, Arnault shifted the family company from construction to real estate, and he began investing in the US – a curious decision for a French businessman in the 1970s.
He focused on holiday accommodation properties that were undervalued, and when that proved successful, he began to seek other undervalued gems, starting with Christian Dior.
All his life, Arnault’s mother had a fascination with Dior. But in 1984, the company was known less as a creator of fashion than as a safe option for French ladies to wear to lunch, as Vogue Editor-in-Chief Anna Wintour put it.
More importantly, Dior’s parent company, Willot Group, went bankrupt, and the French government was looking for someone to save it. “Immediately, I thought this brand has a lot of potential. It is under-evaluated. It is small compared to what I thought the world was going to become, and so I moved to buy it,” Arnault says. “It was a risky move at the time because it was much bigger than the company of my father, but starting from that, we built the LVMH of today.”
An elite line-up
With one distinguished luxury brand in his portfolio, Arnault developed the criteria that would guide its expansion over the following decades. “We try to build a large business with our partners with one criterion – the best quality and the most elite products in every line that we are selling throughout the world,” he said in 1987.
By that time, Louis Vuitton and Moët Hennessy had merged to form LVMH. Over the next two years, Arnault invested steadily in the company, ultimately becoming its largest shareholder. It was his ruthless ousting of LVMH’s former chairman, Henry Racamier, that earned him the ‘wolf in cashmere’ moniker.
“Family business, especially in the luxury area, is key for success.” – Bernard Arnault
Predicting a period of wealth and a popular willingness to spend on high-quality items, Arnault proceeded to bring the world’s top labels into the LVMH fold. One trait that unites many of the LVMH brands is that they began as family businesses, just like Arnault’s own business. This is no accident.
“Family business, especially in the luxury area, is key for success,” Arnault says. “When you are in a family, you have two major advantages. One is you can think long-term. It implies I’m not that interested in the numbers of the next six months – what I am interested in is that the desire for the brand will be the same in 10 years as it is today.
The second advantage of being a family business is in hiring people. When people come to LVMH, they do not join a group with anonymity. They come into the family. You are not just a little person in a big thing – you are a member of the family, and you will be taken care of as such.”
Thirty years and billions of euros since he took over the leadership of LVMH, Arnault is renowned as a visionary financier and empire-builder.
However, those who know him understand that his real talent lies in his ability to facilitate the creativity and artistry of the world’s most influential designers.
“I think his big strength is actually to speak to creative people and to make them thrive under his management,” says Antoine, Arnault’s son and CEO of the LVMH leather goods brand Berluti.
“It’s not to create profit or create more revenue or double the size of the business. I know that’s the consequence, and that’s usually what happens, but his real talent is with creative minds.”
When the Italian luxury brand Fendi was being courted by a slew of potential buyers in 2001, the legendary German creative director Karl Lagerfeld, who served as the label’s fur and women’s ready-to-wear collection designer in the 1970s, advocated for the company to go to Arnault and LVMH.
Beyond capturing the respect of the world’s mostesteemed designers, Arnault also sees LVMH as a training ground for the creators of the future.
“The success of the group is made of the quality of the product, and the quality of the product is a consequence of the extraordinary craftsmen and craftswomen that are working with us,” he says.
“We have a large campaign of hiring young people that sometimes are not really thinking of becoming craftsmen or craftswomen, but once we have given them the idea and once we train them, we have a rate of success that is near 90%, and it’s very rewarding for us to see these young people being so proud.”
Arnault is fiercely competitive
Arnault’s patronage of human creativity has bled into his personal life. Starting with his first auction purchase, a painting by Claude Monet, the LVMH CEO has added pieces by Jean-Michel Basquiat, Damien Hirst, Maurizio Cattelan, Andy Warhol and Pablo Picasso to his collection.
In 2014, he placed much of his collection into the Louis Vuitton Foundation, a contemporary art museum in Paris designed by the pre-eminent architect Frank Gehry. The swooping, sail-like structure attracts more than a million visitors every year and is considered one of the most important galleries in Europe.
“I am very competitive. I always want to win.” – Bernard Arnault
Today, although boutiques around the world have been closed for months, Arnault is able to continue steering LVMH into the future because of his sound predictions over the course of his career about what wealthy people want to spend their money on.
Although revenue might be coming in slowly now, Arnault is using what he has earned from Louis Vuitton’s 45% profit margins to prepare his next moves, spending big to win big when the industry recovers. Recalling a match he once played with Roger Federer, in which he scored a single point against the tennis icon, Arnault says, “I am very competitive. I always want to win.”
Culture of luxury
From Hollywood partnerships to marine conservation campaigns, LVMH brands have a tenacious habit of appearing in popular media and culture.
Belvedere Vodka was acquired by LVMH in 2005. It has partnered with celebrity artists including Chelsea Handler, Usher, Janelle Monáe and John Legend. In 2015, the brand was chosen as the official vodka of the 24th James Bond film Spectre.
Dom Pérignon Champagne is named after a Benedictine monk who was an important pioneer in the quality of Champagne but who, contrary to popular myths, did not discover the Champagne method for making sparkling wines.
In 1971, the Shah of Iran ordered several bottles of the first vintage of Dom Pérignon Rosé (the 1959) for the 2,500-year celebration of the Persian Empire. Two bottles of that champagne, from that order, were sold at auction for a total of £43,000 in 2008. Menswear and leather brand Berluti was founded in 1895 and acquired by LVMH in 1993.
Its CEO is Arnault’s son Antoine. In 2017, The Business of Fashion named Berluti among the 16 best companies to work for in the fashion industry. Its patrons include Frank Sinatra, Robert De Niro and Timothée Chalamet. Rihanna developed her cosmetic line Fenty Beauty within LVMH’s Kendo division, which served as an incubator.
Fenty Beauty aims to provide for the inclusion of all skin tones in cosmetics offerings, including extensive shade offerings for people with deeper skin tones. The launch of Rihanna’s fashion label Fenty in 2019 made her the first woman to lead a brand under the LVMH umbrella.
Kenzo was founded in 1970 by Japanese designer Kenzo Takada and was acquired by LVMH in 1993. The brand pioneered the use of Asian and Japanese style within the construction of European fashion. Patrons include Beyoncé, Zooey Deschanel and Lorde. Britney Spears was the face of its 2018 La Collection Memento No. 2 campaign.
Make Up For Ever is a French cosmetics brand created in 1984 by make-up artist Dany Sanz and acquired by LVMH in 1999 to complement its high-end make-up offering. The brand caters to professional make-up artists in the fashion and movie industries. French perfume house Guerlain, founded in 1828, is among the oldest in the world.
It was run by the Guerlain family until 1994, when it was bought by LVMH. Its fragrances such as Jicky, Shalimar and Vétiver have long influenced perfumery traditions. Jicky, known for its main notes of lavender and vanilla over animalic civet, is widely heralded as the first ‘modern’ fragrance and the first to be referred to as a perfume.
Bulgari was founded in Epirus, Greece, in 1884 as a single jewellery shop and expanded over the decades to become an international accessories brand.
In 2011, the Bulgari family sold the brand to LVMH for US$6 billion, more than LVMH had paid for any other company, plus a 3% stake in LVMH, making the Bulgaris the second-biggest family shareholder behind the Arnaults.
As of 2018, Bulgari has given US$80 million (A$117 million) to Save the Children. In 1999, LVMH bought nearly 100% of the Swiss luxury watchmaker TAG Heuer. Leonardo DiCaprio, Brad Pitt and Uma Thurman are among the dozens of celebrities who have endorsed its products.
London-based Christoph Behling has been the lead designer for TAG Heuer since 2004. The collaboration has resulted in some of the brand’s most celebrated pieces including the world’s fastest chronograph, the Mikrogirder 1/2000th, launched in 2012.
Tiffany & Co. was founded in 1837 and is known for its diamond and sterling-silver jewellery and for being an arbiter of American taste and style. The brand launched its first men’s jewellery collection in October 2019.
In November 2019, LVMH announced its purchase of Tiffany & Co. for US$16.2 billion, US$135 per share. The deal was expected to close by June 2020. Sephora is a French multinational chain of personal care and beauty stores featuring nearly 3,000 brands. It was founded in 1970 and bought by LVMH in 1997.
In 2016, Sephora launched a smartphone application that uses augmented reality to provide contouring tutorials and give users a virtual makeover. Its makeup is synonymous with quality and is extremely popular with young women.
Princess Yachts is a British luxury motor yacht manufacturer that was bought by LVMH in 2008 for €200 million. In 2016, it became the first luxury yacht manufacturer to officially collaborate with the Marine Conservation Society.
The partnership centred around the publication of an illustrated children’s book, Enid & Her Magic Yacht, which highlights the importance of marine conservation for future generations.
[fact_file bgcolor=”#E9BF3B” title=” “]
1949: Bernard Jean Étienne Arnault was born in Roubaix, France.
1971: Graduates from the prestigious École Polytechnique in Paris with a degree in engineering.
1976: Convinces his father to liquidate the construction division of their company, Ferret-Savinel, and invest the proceeds into real estate. The sale generates 40 million French francs, and the company is renamed Férinel.
1977: Becomes CEO of Férinel.
1981: Moves to the US, develops condominiums in Palm Beach, Florida, and builds an American branch of the family business.
1983: Returns to France and begins the purchase of bankrupt textile firm Boussac Saint-Frères, which owns Christian Dior.
1985: Sells all Boussac assets, except for the Christian Dior brand and the Le Bon Marché department store, for US$400 million (A$588.9 million). He becomes CEO of Christian Dior.
1987: Begins investing in LVMH, putting in hundreds of millions of dollars over the following years.
1989: Gains control over 43.5% of LVMH shares, with 35% of the voting rights. He is unanimously elected chair of the executive management board. He removes top executives and hires new talent to revitalise the company.
1990s: Executes ambitious expansion plan, acquiring Guerlain (1994), Loewe (1996), Marc Jacobs (1997), Sephora (1997) and Thomas Pink (1999).
2007: Named Commander of the Legion of Honour, France’s highest order, and is featured in Time magazine’s annual Time 100 issue as one of the 100 most influential people in the world.
2008: Bought Princess Yachts for €253 million (A$414.9 million).
2010 – 2013: Sat on the Board of Advisors of the Malaysian 1MDB fund.
2018: Became France’s richest person.