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Arnault On the Slimane Effect
The LVMH chief hopes the “global superstar” designer will help the French brand double or triple its revenues within the next five years.
PARIS — Bernard Arnault is betting big on his latest recruit.
The chairman and chief executive officer of LVMH Moët Hennessy Louis Vuitton said on Thursday he hopes Hedi Slimane, a “global superstar” designer, will help Céline double or triple its revenues within five years. Slimane is set to join the brand on Feb. 1, and extend its activities into men’s wear, couture and fragrance.
Speaking after LVMH reported record results for 2017, with net profit jumping
“The objective with him is to reach at least 2 billion to 3 billion euros, and perhaps more, within five years.”
— BERNARD ARNAULT, LVMH MOËT HENNESSY LOUIS VUITTON
29 percent to break the threshold of 5 billion euros, Arnault said sales at Céline are close to 1 billion euros. That places it just behind Fendi as among the group’s most powerful luxury brands. Louis Vuitton
and Christian Dior are the top two.
“The objective with him is to reach at least 2 billion to 3 billion euros, and perhaps more, within five years,” Arnault told analysts and reporters gathered at LVMH’s headquarters on Avenue Montaigne here. “Everything is in place for this brand to achieve quite exceptional growth.”
Slimane famously set in motion the skinny tailoring trend during his tenure
at Dior Homme from 2000 to 2007. He
has been on fashion’s sidelines since April
2016, when he wrapped up a celebrated,
and controversial, four-year tenure at Yves Saint Laurent, which he helped propel past 1 billion euros in sales.
Louis Vuitton remained LVMH’s undisputed star brand in 2017, helping to drive sales in the fashion and leather goods division up 13 percent in organic terms to
15.47 billion euros. In the fourth quarter,
the segment grew 10 percent, slightly exceeding analysts’ forecasts.
Thomas Chauvet, head of luxury groups equity research at Citi, estimated that Vuitton recorded double-digit sales growth, adding 1 billion euros in revenues last year alone — a figure that Arnault neither confirmed nor denied. LVMH does not break out sales data for individual brands in its fashion division.
“We could have had a much bigger turnover. We didn’t for several reasons: one of them being production capacity, but also the fact that when there is too much demand for a given product, we prefer to ensure diversity. Top-tier products are growing very well right now at Louis Vuitton,” Arnault said.
He singled out high jewelry and exotic leather handbags, and described Vuitton’s collaborations with U.S. artist Jeff Koons and streetwear brand Supreme as very successful, with the latter selling out in two weeks.
In a veiled dig at rival group Kering, which has seen stratospheric growth with its flagship Gucci brand because of creative director Alessandro Michele’s geekchic aesthetic, Arnault said he preferred Louis Vuitton not to expand too fast.
“Our ambition...is to remain the most desirable brand for the next 10 years and beyond, and for that, you have to be very careful and try to be wary of overly pronounced and divisive trends, which have the disadvantage of weighing on the image. We aim to combine modernity with timelessness,” he said.
The luxury magnate said LVMH has maintained its momentum in January
so far, after posting revenues of 42.64
billion euros for all of 2017, up 13 percent over the previous year. Stripping out the impact of currency fluctuations, sales were up 12 percent last year.
The group recorded double-digit growth in every region, except Europe, in the fourth quarter. “I am confident in our business in the medium-term,” Arnault said, noting that living standards were set to continue improving, both in mature and developed economies, ensuring a growing customer base for luxury brands.
Nonetheless, he reiterated his by-now-standard warning that a crisis could hit at any time. “I am personally convinced that we are going to have a crisis sometime in the next five years — I can’t say when,” he said. “That’s why I say that I’m confident for 2018, but you have to be cautious.”
Arnault suggested that a financial markets meltdown could have at least one silver lining: Making potential acquisition targets cheaper.
“Prices are very high, so for mergers and acquisitions, I would wait for the next crisis. Everything collapses, and that’s when it becomes attractive, and in
general that is the moment when people no longer want to buy anything,” he said, displaying the business instincts that have made him France’s wealthiest man.
In the meantime, he suggested Louis Vuitton might have to tweak its prices in certain regions to compensate for the strength of the euro against the U.S. dollar. A strong euro makes European products more expensive in foreign- currency terms.
Jean-Jacques Guiony, chief financial
officer at LVMH, said currency fluctuations shaved 6 percent off group revenues in the fourth quarter. They cost the group
243 million euros in revenues last year,
mostly in the second half.
He reported that Marc Jacobs, which is undergoing a lengthy and painful restructuring, is seeing the first signs of improvement. “The work on product is starting to bear fruit,” the executive said, noting an uptick in sales in the U.S. brand’s own stores.
“We are already seeing an improvement in orders. To be clear, we are very far from breaking even, but there is a certain amount of improvement. That is the first
time I am saying that,” Guiony added.
Among last year’s notable successes in
perfumes and cosmetics was the launch of the Fenty Beauty by Rihanna line. LVMH is a majority owner of the brand through its Kendo division, which was estimated to have paid up to $10 million to make the
deal in 2016.
Arnault highlighted the “terrific” success of the cosmetics collection, noting that sales were in the hundreds of millions of euros since the line’s launch in September, and its target for 2018 is equally ambitious.
“We started from scratch, so we didn’t make an investment, and when you see some highly respectable competitors paying more than 1 billion euros for cosmetics brands with revenues of 200 million or 300 million euros, I would just like to highlight the difference in approach compared with our strategy,” he said.
The Rihanna line, together with strong
sales at Christian Dior Parfums, helped to
propel organic revenues for the perfumes
and cosmetics division up 14 percent in
the fourth quarter. Watches and jewelry
rose 9 percent, buoyed by the strong
performance of jeweler Bulgari.
Turnover in selective retailing, the
division that includes Sephora, rose 14
percent in organic terms, while wines and
spirits posted a 6 percent increase.