FOR­EVER YOUNG

BY WEAV­ING TO­GETHER TRA­DI­TION AND TRENDI­NESS, LVMH'S BERNARD AR­NAULT HAS CRE­ATED THE WORLD'S LARGEST LUX­URY EM­PIRE AND A $100 BIL­LION FOR­TUNE. NOW HE IS READY TO SCALE UP.

Forbes Middle East - - BERNARD ARNAULT -

Bernard Ar­nault in­spires me,” says Sheron Bar­ber.

The 38-year-old has trav­eled from Los An­ge­les to the pala­tial Louis Vuit­ton store on Paris' Place Vendôme dur­ing the height of fall Fash­ion Week to pay trib­ute to his idol, the head of lux­ury colos­sus LVMH. Bar­ber is a spec­tac­u­lar sight. He has dyed black dol­lar signs in his close-cropped fuch­sia and yel­low hair, a green grill cov­er­ing his teeth and mul­ti­ple Louis Vuit­ton lug­gage locks dan­gling from the stain­lesssteel chain en­cir­cling his neck. “I spent a cou­ple hun­dred thou­sand last year on LV,” he says. He earns a hand­some liv­ing cus­tomiz­ing the looks of mu­sic acts like Mi­gos and Post Malone. In his lat­est video, “Saint-Tropez,” Post Malone wears a ch­est plate con­structed by Bar­ber that is a blend of black leather and a Vuit­ton bag. Of Ar­nault, Bar­ber de­clares: “He has sin­gle-hand­edly de­fined mod­ern lux­ury.”

“It's a most ex­cep­tional Louis Vuit­ton mai­son,” Ar­nault says of the Place Vendôme store, speak­ing English with a dis­tinct French ac­cent. “You can see the en­tire uni­verse of the brand.” Opened two years ago, the space feels like a cross be­tween a mu­seum and a pri­vate club. An ar­ray of Vuit­ton's wares are dis­played in­side gleam­ing vit­rines and on art­fully placed shelves. Mar­ble stair­cases with glass balustrade­s lead to a pri­vate ate­lier on the fourth floor where six seam­stresses cre­ate be­spoke dresses for celebri­ties like Lady Gaga and Emma Stone. “I was very in­volved in the de­sign,” Ar­nault says.

He ob­ses­sively tracks his top brands, es­pe­cially Louis Vuit­ton, the con­glom­er­ate's cash ma­chine, which ac­counted for nearly a quar­ter of LVMH's 2018 rev­enue of $54 bil­lion and up to 47% of prof­its, ac­cord­ing to an­a­lysts. (LVMH shares fi­nan­cials for its top five di­vi­sions but not for its in­di­vid­ual brands.) Vuit­ton's selec­tion of bags, ap­parel and ac­ces­sories, which the com­pany never whole­sales or dis­counts, is an ever-chang­ing mix­ture of clas­sic and con­tem­po­rary, like an $8,600 lim­ited-edi­tion twist on its Ca­pucines purse in turquoise leather with an ap­pliqué pat­tern de­signed by Tsch­a­bal­ala Self, a 29-year-old artist from Har­lem. Amer­i­can Vir­gil Abloh, 39, Vuit­ton's new menswear de­signer, cre­ated a stir early this year when he de­buted glow-in-the-dark bags that use fiber op­tics to il­lu­mi­nate the LV logo in the col­ors of the rain­bow.

“Why are brands like Louis Vuit­ton and Dior so suc­cess­ful?” Ar­nault asks. “They have these two as­pects, which may be con­tra­dic­tory: They are time­less, [and] they are at the ut­most level of moder­nity . . . . It's like fire and wa­ter.”

That para­dox has trans­lated into record sales and prof­its at LVMH, whose ros­ter of more than 70 brands in­cludes Fendi, Bul­gari, Dom Pérignon and Givenchy. That, in turn, has helped drive up LVMH's stock price, which has nearly tripled in less than four years. Ar­nault, who owns 47% of the com­pany's shares with his fam­ily, is now worth $102 bil­lion, $68 bil­lion more than he was in 2016. He is the third-rich­est per­son on earth, just be­hind Jeff Be­zos ($110 bil­lion) and Bill Gates ($106 bil­lion).

And at 70, Ar­nault is far from done. In late Oc­to­ber, LVMH made an un­so­licited $14.5 bil­lion bid for the 182-year-old Amer­i­can jeweler Tif­fany. If the deal goes through, it will be Ar­nault's big­gest ac­qui­si­tion ever. “If you com­pare us to Mi­crosoft, [we are] small,” he says. In­deed, LVMH's mar­ket value of $214 bil­lion lags far be­hind the soft­ware gi­ant's $1.1 tril­lion. “It's just the be­gin­ning,” says Ar­nault.

Ar­nault's be­gin­nings in France's in­dus­trial north were far re­moved from the glit­ter­ing perch he now oc­cu­pies. His first love was mu­sic, but he didn't have the tal­ent to make it as a con­cert pi­anist. In­stead, af­ter grad­u­at­ing from an elite French en­gi­neer­ing school in 1971, he joined his fa­ther at the con­struc­tion firm founded by his grand­fa­ther in the city of Roubaix.

An ex­change with a New York cab driver that same year planted a seed that would grow into LVMH. Ar­nault asked the cab­bie if he knew of France's pres­i­dent, Ge­orges Pom­pi­dou. “No,” replied the driver, “but I know Chris­tian Dior.”

At age 25, Ar­nault took charge of the fam­ily busi­ness. Af­ter so­cial­ist François Mit­ter­rand be­came France's pres­i­dent in 1981, Ar­nault moved to the States and tried to build a divi­sion there. But his am­bi­tions were big­ger than con­struc­tion. He wanted an en­ter­prise he could scale, a busi­ness with French roots and in­ter­na­tional reach.

In 1984, when he learned that Chris­tian Dior was for sale, he pounced. Its par­ent, a tex­tile and dis­pos­able-di­a­per com­pany called Bous­sac, had gone bank­rupt, and the French gov­ern­ment was look­ing for a buyer. Ar­nault put up $15 mil­lion of his fam­ily's money, and Lazard sup­plied the rest of the $80 mil­lion pur­chase price. At the time, ac­cord­ing to re­ports, he made a pledge to re­vive oper­a­tions and pre­serve jobs, but in­stead he fired 9,000 work­ers and pock­eted $500 mil­lion, selling off most of the busi­ness. Crit­ics re­coiled at his brazen­ness, which seemed more Amer­i­can than gen­teel French. The me­dia later dubbed Ar­nault “the wolf in the cash­mere coat.”

Ar­nault's next prey was Dior's per­fume divi­sion, which had been sold to Louis Vuit­ton Moët Hen­nessy, and a fight be­tween the com­pany's brand heads gave him an open­ing. First, he teamed up with the boss of Vuit­ton, the leather­goods com­pany whose founder had made cus­tom trunks for Em­press Eugénie, the wife of Napoleon III. Ar­nault helped the head of Vuit­ton oust Moët's chief, only to get rid of him, too. By 1990, again backed by Lazard and us­ing the cash from Bous­sac, he had taken con­trol of the com­pany, which

in­cluded Moët & Chan­don, the fa­mous French cham­pagne maker, and Hen­nessy, the French co­gnac pro­ducer that dates to 1765.

Af­ter con­quer­ing Louis Vuit­ton Moët Hen­nessy, Ar­nault spent bil­lions to ac­quire lead­ing Euro­pean com­pa­nies in fash­ion, fra­grance, jew­elry and watches, and fine wines and spir­its. Since 2008, LVMH has pur­chased 20, bring­ing the to­tal to 79 brands. In 2011 it paid nearly $5 bil­lion for the Ital­ian jeweler Bul­gari in a mostly stock deal. Two years later it bought the fine-wool pur­veyor Loro Piana for a re­ported $2.6 bil­lion. Ar­nault's most re­cent ac­qui­si­tion was in April when LVMH paid $3.2 bil­lion for the Lon­don-based ho­tel group Bel­mond, whose op­u­lent hold­ings in­clude the Cipri­ani ho­tel in Venice, the lux­ury train line Ori­ent Ex­press and three ul­tra-luxe sa­fari lodges in Botswana.

“Bernard Ar­nault is a preda­tor, not a cre­ator,” says a banker who was close to the Bous­sac deal.

Ar­nault has not suc­ceeded at ev­ery con­quest. In 2001 he lost what the me­dia called the “hand­bag war” for con­trol of fa­bled Ital­ian fash­ion house Gucci, to his French lux­ury ri­val, François Pin­ault. Over the next decade, LVMH used a stealth tac­tic com­mon among hedge funds—cash-set­tled eq­uity swaps—to se­cretly ac­quire 17% of Her­mès, the 182-year-old maker of fine silk scarves and the iconic Birkin bag. Her­mès fought Ar­nault off in a pro­tracted bat­tle that ended in 2017 with LVMH re­lin­quish­ing most of its Her­mès shares.

Up close, Ar­nault's pol­ished ap­pear­ance is like a suit of ar­mor. On an over­cast Fri­day morn­ing in late Septem­ber, he is at­tired in a selec­tion of LVMH brands, in­clud­ing a pin-striped suit by Ce­line, a navy tie by Loro Piana, black leather slip-ons by Ber­luti and a white cuff-linked shirt by Dior with his ini­tials em­broi­dered just be­low his heart. Slim and 6 foot 1, he stays fit play­ing four hours of ten­nis a week, some­times with his friend Roger Fed­erer. “I try not to be fat, as you see, and I do a lot of sports,” he says.

Those games are among his only breaks from a worka­holic sched­ule that starts at 6:30 a.m. in his 17th-cen­tury man­sion in the posh 7th Ar­rondisse­ment on Paris's Left Bank. He be­gins each morn­ing lis­ten­ing to clas­si­cal mu­sic, scanning in­dus­try news and tex­ting fam­ily mem­bers and brand chiefs. “What I have in mind ev­ery morn­ing is that the de­sir­abil­ity of a brand should be as strong in ten years,” he says. “It's re­ally the key to our suc­cess.” By 8 a.m. he's in his of­fice at 22 Av­enue Mon­taigne, where he stays as late as 9 p.m. Oc­ca­sion­ally he'll take a

20-to-30-minute pause to play the Yamaha grand pi­ano in a room down the hall from his ninth-floor of­fice.

“He works 24 hours,” says Del­phine Ar­nault, 44, Ar­nault's old­est child, from his first mar­riage, and the ex­ec­u­tive vice pres­i­dent of Louis Vuit­ton. “When he sleeps, he's dream­ing of new ideas.”

Ev­ery Satur­day, he prowls his re­tail stores, re­ar­rang­ing bag dis­plays and mak­ing sug­ges­tions to clerks. He visits as many as 25 stores, in­clud­ing the com­pe­ti­tion, in a sin­gle morn­ing. “It's a rit­ual,” says his son Frédéric, 25, who works at LVMH's top watch brand, TAG Heuer.

Ar­nault re­lays de­tails from his store visits to the chiefs of his top brands. He re­cently alerted Louis Vuit­ton CEO Michael Burke that the new “it” bag, the $2,480 On­thego tote, was not in stock at the Place Vendôme shop. “He com­plains when too many SKUs are sold out,” says Burke, who has worked with Ar­nault since 1980.

At least once a month, Ar­nault trav­els in his Bom­bardier jet to some cor­ner of his em­pire. In Oc­to­ber, he vis­ited the small town of Keene, Texas, where he and Don­ald Trump cut the rib­bon on the first of two new Louis Vuit­ton work­shops slated to cre­ate 1,000 jobs over the next five years. (The brand al­ready has two work­shops in Cal­i­for­nia.) “I am not here to judge his types of poli­cies. I have no po­lit­i­cal role,” said Ar­nault to re­porters. Still, the event sparked a flash of con­tro­versy within his own ranks. Vuit­ton's wom­enswear artis­tic di­rec­tor, Ni­co­las Gh­esquière, wrote on In­sta­gram: “I am a fash­ion de­signer re­fus­ing this as­so­ci­a­tion #trump­isajoke #ho­mo­pho­bia.” Ar­nault didn't re­spond to Gh­esquière's dig.

In late Oc­to­ber, Ar­nault, Burke and Dior CEO Pi­etro Bec­cari were set to fly to Seoul to visit stores, in­clud­ing a new Frank Gehry-de­signed Vuit­ton out­post. It's the sixth Vuit­ton store to in­clude an art gallery that will show se­lec­tions from the ex­ten­sive col­lec­tion of the LVMH­funded Fon­da­tion Louis Vuit­ton, which also ro­tates through the Fon­da­tion's $135 mil­lion Paris mu­seum (also de­signed by Gehry).

Even with the con­glom­er­ate's mas­sive foot­print around the world—4,590 shops in 68 coun­tries—store open­ings and clos­ings of­ten de­pend as much on Ar­nault's gut and a neigh­bor­hood's am­bi­ence as on more tra­di­tional met­rics like sales per square foot. In China, one of LVMH's most im­por­tant mar­kets, he lim­its the num­ber of Louis Vuit­ton shops to con­trol the pace of ex­pan­sion.

Last year, Louis Vuit­ton shut­tered a store in Fort Lauderdale, Florida, be­cause ad­ja­cent shops, restau­rants and park­ing weren't ritzy enough. Ar­nault vis­ited a prop­erty on the Champs-Élysées mul­ti­ple times be­fore he ap­proved a new Dior store near the Arc de Tri­om­phe that opened in July, de­spite data show­ing the pre­vi­ous ten­ant had slug­gish sales. “He pushes you to re­ally be sure,” Dior chief Bec­cari says. “He wants to chal­lenge you, that's his tac­tic.”

Show­ing up ri­vals is another tac­tic. In July, as ap­parel brands were com­pet­ing to see who could be the most eco­con­scious, he an­nounced a part­ner­ship with the Bri­tish fash­ion de­signer Stella McCart­ney (daugh­ter of Paul), who has long touted her sus­tain­abil­ity ef­forts (she says she re­fuses to use glue in her sneaker line be­cause it's made from boiled an­i­mal parts). Ar­nault in­vited McCart­ney, who in 2018 ended a 17-year part­ner­ship with the Pin­ault fam­ily's Ker­ing lux­ury group (owner of Gucci), to be­come his “spe­cial ad­vi­sor.” She ac­cepted, de­spite LVMH's de­ci­sion to con­tinue to make prod­ucts with leather and fur (and glue). Ar­nault also de­clined to join the “Fash­ion Pact,” led by Ker­ing and signed by 32 ap­parel mak­ers, in­clud­ing Chanel, Her­mès, fast-fash­ion gi­ant H&M and even McCart­ney, who all pledged to lower car­bon emis­sions.

Ar­nault then made his own se­ries of eco-ges­tures dur­ing Fash­ion Week, when the me­dia con­verged on Paris to cover the shows. At Tues­day's Dior show, where models pa­raded across a stage dec­o­rated with 170 trees in dirt-filled burlap bags, the press was told that the theme was sus­tain­abil­ity and that the elec­tric­ity at the event was pro­duced with gen­er­a­tors pow­ered by canola oil. The next evening, LVMH hosted 50 jour­nal­ists for a two-and-a-half-hour event in an au­di­to­rium at com­pany head­quar­ters. Ar­nault and ten LVMH brand chiefs took turns on a brightly lit stage recit­ing their com­mit­ments to en­vi­ron­men­tal stew­ard­ship, their pre­sen­ta­tions in­ter­spersed with slickly pro­duced videos of models strut­ting down cat­walks and cash­mere goats frol­ick­ing on the Mon­go­lian steppes.

Mid-event, Ar­nault was asked to share his thoughts on young cli­mate ac­tivists like 16-year-old Greta Thun­berg. “I'm a nat­u­ral op­ti­mist,” he said, “un­like Greta, who has a big prob­lem, and that's pro­ject­ing an out­ra­geous amount of pes­simism in her mes­sages with­out any real solutions.”

Not sur­pris­ing for a cor­po­rate ti­tan, he prefers not to dwell on prob­lems. “He doesn't like to hear the word ‘no,'” says Anna Win­tour, the long­time Vogue edi­tor. “It's not part of his vo­cab­u­lary.” Not from ri­vals, ac­qui­si­tion tar­gets or even en­vi­ron­men­tal cham­pi­ons.

McCart­ney is one of many big names he's reeled in. In 2017, LVMH launched a cos­met­ics line, Fenty Beauty, with the pop star Ri­hanna, dis­tribut­ing the prod­ucts through its re­tail beauty chain Sephora's 2,600 stores. Cap­i­tal­iz­ing on Fenty's broad-au­di­ence of­fer­ings—its foun­da­tion comes in 40 skin shades—and on its founder's 77 mil­lion In­sta­gram fol­low­ers, the divi­sion will hit $550 mil­lion in sales this year, Ar­nault says. He's bet­ting that Fenty Fash­ion, the ap­parel col­lec­tion LVMH de­buted with Ri­hanna in May, will meet with sim­i­lar suc­cess. “She brings a dif­fer­ent vi­sion of fash­ion,” Ar­nault says. “For the fu­ture, it's very good for us to be con­nected to Mil­len­ni­als.”

To keep his brands mod­ern, he also looks to his five chil­dren from two mar­riages, four of whom work at LVMH: Del­phine, 44; An­toine, 42;

Alexan­dre, 27; and Frédéric, 25. His youngest child, Jean, 21, will likely join the com­pany when he fin­ishes school, ac­cord­ing to Alexan­dre.

Shortly af­ter he started as strat­egy and dig­i­tal di­rec­tor at the Swiss watch brand

TAG Heuer 13 months ago,

Frédéric Ar­nault pitched an idea to his fa­ther over din­ner.

To en­hance the brand's smart­watch for golfers, he wanted to ac­quire a French startup, FunGolf, that had built an app with de­tailed ter­rain data on

39,000 cour­ses. Play­ers could use it to mea­sure how far they were from sand traps or greens. “The peo­ple in the M&A depart­ment thought I was crazy,” he says. But once he made the case to his fa­ther, says Frédéric, “He said, ‘Go for it.'”

Alexan­dre Ar­nault says Bernard was quick to green-light tech deals Alexan­dre spear­headed at the fam­ily in­vest­ment ve­hi­cle, Groupe Ar­nault, in­clud­ing bets on Spo­tify, Slack, Airbnb, Uber and Lyft. Then, in 2016, he per­suaded LVMH to pay $719 mil­lion for an 80% stake in the 121-year-old Ger­man lug­gage maker Ri­mowa, fa­vored by A-lis­ters like David Beck­ham and An­gelina Jolie. At Ri­mowa, Alexan­dre later led prod­uct col­lab­o­ra­tions with au courant brands like the Amer­i­can skate­board­ing line Supreme.

Del­phine, mean­while, leads the six-year-old LVMH Young Fash­ion De­signer Prize, awarded each year to one de­signer cho­sen from thou­sands of ap­pli­cants. Louis Vuit­ton's Vir­gil Abloh was a fi­nal­ist for the 2015 prize (he had in­terned at Fendi in 2009 with his friend Kanye West). And LVMH has launched an ac­cel­er­a­tor pro­gram for up to 50 promis­ing star­tups in the lux­ury goods sec­tor at Paris' Sta­tion F, the brain­child of French bil­lion­aire Xavier Niel, who also hap­pens to be Del­phine's long-term part­ner and the fa­ther of the cou­ple's two chil­dren.

So what do Ar­nault's off­spring say about which one of them is likely to lead the com­pany one day? As though read­ing from the same script, they all side­step the ques­tion. “Our fa­ther is very young,” says Del­phine. “He'll work for 30 more years,” Alexan­dre says. “I don't think he'll ever stop,” says An­toine, head of LVMH cor­po­rate com­mu­ni­ca­tions and chief of Ber­luti. “This is not a topic we think about,” Frédéric says. “We hope he is go­ing to stay as long as pos­si­ble in this role.”

“Peo­ple ask me all the time,” says Ar­nault. “What is most im­por­tant for the group is we find the best, and we'll see if it's in the fam­ily or out­side the fam­ily.” How long will he work? “I have no end de­cided.”

Though he won't say which of his chil­dren he is most likely to pro­mote, he is ea­ger to talk about their tal­ents. He shows off a video on his iPhone 11 of Frédéric play­ing a Liszt sonata in prepa­ra­tion for a con­cert he will give at a mu­sic fes­ti­val out­side Paris to­gether with his mother. Cana­dian-born pi­anist Hélène MercierAr­nault, 59, per­forms reg­u­larly as a soloist and cham­ber mu­si­cian. “Like a pro­fes­sional,” Ar­nault says about Frédéric's skill. “I'm not play­ing like that.”

As for sib­ling ri­valry, Ar­nault and his chil­dren paint a por­trait of fam­ily har­mony. The sib­lings of­ten gather for Satur­day lunch with their par­ents, and they all spend some of Au­gust at the Ar­nault com­pound in Saint-Tropez. Only Frédéric ad­mits that dis­cord sur­faces on the ten­nis court. “It can get quite tense,” he says. “Our fa­ther is very com­pet­i­tive. He doesn't like los­ing. This is some­thing he's trans­mit­ted to us.” No one close to the fam­ily will make an on-the-record pre­dic­tion about suc­ces­sion. But one long­time ob­server says that when Ar­nault fi­nally steps down “It will be Game of Thrones.”

Ar­nault sees the fu­ture play­ing out quite dif­fer­ently, con­vinced that his tight-knit fam­ily's con­trol will give LVMH an edge for years to come. In his own mind, he's go­ing up against not only his com­peti­tors in the lux­ury sec­tor but also global gi­ants. He calls Mi­crosoft a “beau­ti­ful com­pany” but notes that Gates has held onto only a small num­ber of shares. “Long-term he won't be there,” he muses.

Be­fore pro­claim­ing his vi­sion for his con­glom­er­ate, he catches him­self. “In a way, I should not say that, be­cause you may think I am pre­ten­tious,” he says. But then he lets loose: “[LVMH] is a French mon­u­ment. Be­cause it rep­re­sents France all over the world. Peo­ple know bet­ter the name of Louis Vuit­ton, Chris­tian Dior, Dom Pérignon, Che­val Blanc, than any­thing else. Maybe they know also Napoleon? Gen­eral de Gaulle? We think it's im­por­tant that this group, for the long term, is con­trolled by a French fam­ily.”

An­toine, Del­phine and Bernard Ar­nault, with a silk Dior cou­ture dress from the au­tumn-win­ter 2011-2012 col­lec­tion.

Vuit­ton’s Ver­sailles

The Louis Vuit­ton store on Paris' Place Vendôme pays homage to the brand's founder, who opened his first shop nearby in 1854.

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