LOUIS VUITTON’S NEXT GENERATION ‘redefines luxury’
All but one of CEO Bernard Arnault’s five children hold a senior position at the giant fashion retailer.
At Louis Vuitton menswear show in Paris earlier this month, newly hired designer Virgil Abloh sent hoodie-clad models down the runway toting duffel bags made from gleaming high-tech plastic, all to the latest Kanye West album. West, who embraced the tearful designer as he took his bows, was joined by his wife, Instagram superinfluencer Kim Kardashian. Seated steps away: Bernard Arnault, head of parent company LVMH, and four of his adult children.
The duffels, embossed with the LV logo, were a far cry from the monogrammed brown bags that helped LVMH Moet Hennessy
Louis Vuitton SE define and dominate the global luxury industry. They’re just one of the many ways the company is remaking itself as the next generation of Arnaults carves out a greater role. Of Bernard’s five children from two marriages, all but the youngest one hold senior positions at LVMH.
Over the past year, the multipronged group has shaken up its ranks of managers and designers, rolled out new e-commerce platforms and launched a makeup line with the singer Rihanna. It’s become a patron of the French tech scene, subsidizing workspace at a startup incubator and handing out awards to young entrepreneurs. Such moves contrast with LVMH’s longtime modus operandi of acquiring iconic European brands and enhancing their exclusivity.
“Luxury companies are required to engage the consumer in ways they never did before,” said Mario Ortelli, who runs a London-based advisory firm on luxury strategy. “It’s become more of a collaboration” as the response on social media can either boost or sink new collections. The younger Arnaults, Ortelli said, “can look at this market with the eyes of someone who is closer to it” than their 69-year-old father.
Abloh’s hiring illustrates the transformation. A Ghanaian-American streetwear designer, he was a creative consultant to West when he was spotted by Delphine Arnault, 43, Vuitton’s executive vicepresident, and Alexandre Arnault, 26, head of the Rimowa luggage business. Abloh, who studied architecture rather than fashion, has a following of 2.6 million fans on Instagram, many of them willing to pay as much US$2,500 for a pair of sneakers from his collaboration with Nike.
“What’s exciting about him is his approach, and the fact that he’s so open to the world,” Alexandre Arnault said before the show, standing on the rainbow-painted runway. In a nod to LVMH’s success with classic fashion, he added: “It’s about redefining the codes of luxury, making it more accessible for young people. The products will stay exclusive even if the approach is inclusive.”
Bernard Arnault doesn’t plan to retire for at least a decade, according to people familiar with his thinking, and there’s no clear frontrunner to replace him. But as his children expand their influence, and as the serial dealmaker runs out of companies to buy, LVMH is reshaping the brands it already owns. It’s all with an eye to making them increasingly relevant to a generation more excited by Instagram posts and sneaker drops than by the editorial pages of Vogue. Arnault, the chief executive, declined to be interviewed.
The luxury business “is not about It bags anymore,” said Federica Levato, a partner at Bain & Co. in Milan. “Streetwear, T-shirts, puffy jackets, are becoming an important part of the core collection.” Luxury houses have to focus not only on products but also on “communication, visuals, social media, all the touchpoints.’’
The company, 47-percent owned by the Arnault family, posted 43 billion euros (US$50 billion) in sales last year, nearly three times the figure of its nearest competitor, Kering. Its portfolio of 70 brands, from Vuitton and Dior to Moet & Chandon Champagne and Tag Heuer watches, turned in robust 13-per-cent sales growth during the first quarter. Bernard Arnault is the world’s sixthrichest person with a fortune of US$73 billion.
While LVMH doesn’t break out sales for individual brands, Louis Vuitton is the world’s largest and most profitable luxury brand, with sales of nearly US$11 billion and an operating margin of 45 per cent last year, according to HSBC. Shares of the parent company are up about 16 per cent this year.
“Bernard Arnault has a sixth sense about what’s next” in luxury trends, said Ron Frasch, a former president of Saks Fifth Avenue who now works in private equity at Castanea Partners.
Still, there are worrisome signs. Gucci, owned by Kering, is outpacing LVMH in the race for younger customers — an urgent concern, as 85 per cent of growth in the luxury sector now comes from shoppers under age 38, according to Bain. Designer Alessandro Michele has rebooted Gucci with collections that pile on crystals, embroidered flowers, dragons, and cartoon cats. Gucci, which says 55 per cent of its sales are to millennial shoppers, reported revenue up 49 per cent in the first quarter of this year. That compares with 16 per cent at LVMH’s fashion and leather goods division, dominated by Vuitton.
LVMH can no longer count on acquisitions to supercharge growth. Starting in the late 1980s, Arnault snapped up dozens of mostly family-owned companies — fashion houses, watchmakers, champagne growers, and more — scaling them up and finding new markets for their products, especially in China.
Nowadays, there are few opportunities for gamechanging deals. The family owners of Hermes, the high-end handbag maker, rebuffed Arnault’s efforts to build a stake in the company. The owners of privately held Chanel show no interest in selling, either. Arnault’s last big acquisition, in 2017, was essentially a bookkeeping exercise: He spent about 12 billion euros to buy out minority shareholders in Christian Dior, which he already controlled.
Arnault and his team used to be known as “killers’’ who stalked the luxury sector for potential acquisitions, said Gachoucha Kretz, a marketing professor at French business school HEC. Now, “they are taking another path.”
That path includes new management and design talent. LVMH recently replaced the longtime head of Christian Dior with Pietro Beccari, former head of the Fendi unit. Beccari won acclaim there for his e-commerce savvy and for whimsical spectacles that raised awareness of the fur-and-handbags brand. One example: a show in which model and reality TV star Kendall Jenner appeared to walk on water as she traversed a Plexiglas runway over Rome’s Trevi Fountain.
And the family has hired Hedi Slimane, the star designer who set the menswear agenda for more than a decade when he brought back skinny jeans and suits at Dior Homme in the early-to-mid-2000s.
Abloh caught Delphine Arnault’s attention in 2015. Delphine has become LVMH’s chief scout when it comes to design talent. She’s also inherited her father’s penchant for quality control, popping in unannounced at some of LVMH’s more than 4,000 stores around the world to make sure they’re up to snuff.
CEO Arnault has fasttracked two younger sons from his second marriage. Alexandre helped seal the acquisition of Rimowa in 2016 and now runs the German luggage maker. Frederic, 23, became head of “connected technologies” at Tag Heuer last year after graduating from the elite École Polytechnique, his father’s alma mater. The youngest, Jean, is still in school.
The senior Arnault still dictates strategy at headquarters on Paris’s swank Avenue Montaigne. And why shouldn’t he call the shots? said Ashok Som, who teaches luxury management France’s Essec business school: “He started this whole industry.”