Bernard Arnault
As Chair and CEO of LVMH (Mo\u00ebt Hennessy Louis Vuitton SA), a luxury goods holding company, Bernard Arnault (conceived 1949) controls roughly half of a massive conglomerate that possesses more than 70 of the top luxury brands in the world, including Christian Dior, Louis Vuitton, Dom Perignon, Mo\u00ebt et Chandon, Hennessy, Sephora, and TAG Heuer.
Arnault had an unusual professional start for a CEO in the fashion industry: he started as an engineer and property developer in his family's civil engineering company in the industrial north of France. By 1984, he had desires a long ways past construction — and he started to make a series of striking and savage moves to assume control over an enterprise that he could scale at the global level. Toward that end, he bought Boussac, a popular (however bankrupt) French conglomerate, so he could assume control more than one of the businesses under its umbrella: The House of Dior, a prize he had desired for a really long time. Subsequent to selling off a large portion of different assets, he reinvested the cash into his next luxury targets: Mo\u00ebt Hennessy and Louis Vuitton, two iconic French companies that merged into LVMH in 1987.
Arnault's next move was a power play that made him notorious all through Europe. Once in the door at LVMH, he used the steady fighting between the two CEOs to secure a controlling interest and afterward expelled the two fighting CEOs. In the wake of winning "perhaps of the fiercest fight in French fashion," he became Chair, CEO, and majority shareholder of LVMH — a position he keeps on holding as of April 2022. Over the course of the next three decades, he combined the defunct Boussac assets (counting Dior) with the LVMH brands and many acquired companies to make the world's most powerful luxury conglomerate — with revenues of \u20ac44.6 billion ($51 billion) by 2020.
LVMH: Highly Resilient Performance
All through Arnault's 30-year tenure, LVMH's performance has been astoundingly strong through major market downturns. After the 2020 global pandemic caused unprecedented disruption to the luxury retail industry, LVMH recorded revenue of \u20ac64.2 billion out of 2021 (an increase of 44% more than 2020 and 20% north of 2019) and organic revenue growth of 36% versus 2020 and 14% versus 2019. Even a recently acquired asset, Tiffany, had "striking" performance despite the leader store on Fifth Avenue in New York City being closed for renovation.
Education and Early Career (1971 to 1984)
Bernard Arnault was brought into the world in 1949 in Roubaix, an industrial city in the north of France, where his dad, a conspicuous manufacturer, owned a civil engineering and property company, Ferret-Savinel. Arnault's mom, who had a "interest for Dior," made certain that her child was traditionally prepared on the piano. Years later, Arnault made Christian Dior, the gem of high fashion that had intrigued his mom, the foundation of his global luxury group.
In 1971, Arnault earned an undergraduate degree from \u00c9cole Polytechnique, the most selective engineering school in France, and joined his dad's business as Chief Construction Officer.
In his most memorable job out of university, Arnault displayed the strength and business discernment that would later put him on the map — including convincing his dad to sell off the construction business and increase investment in real estate. By 1976 — "years ahead of the opposition" — Arnault was leading the move into a highly profitable, brand-new sector in real estate: building time-share properties. Arnault succeeded his dad as CEO in 1977 and as Chairman in 1978, which gave him full control of the family business at 29 years old.
In 1981, when the French communist party with charge the-rich policies came to power, Arnault moved his family to the U.S., where he endured three years developing Ferret-Savinel's property business. As he explored the competitive U.S. market, he developed desires a long ways past construction and real estate — and he started searching for an enterprise he could scale, ideally "a business with French roots and international reach."
Visionary Entrepreneur or Wolf in Cashmere?
At the point when Arnault returned to France in 1984, he made the first strides in quite a while unbelievable rise to control of the world's largest luxury group. During these early years, he likewise started to draw in both an enthusiastic fan base and a vocal circle of pundits. To his admirers, he was a visionary entrepreneur strengthening French business. To his faultfinders, he was "the wolf in cashmere," who brought an "Somewhat English Saxon savagery to the cultured world of 1980s French business" — something like "a corporate raider destroying hundreds of years of custom."
The House of Dior
Arnault made his most memorable move in 1984, when the French government was offering sponsorships to any business that could safeguard Boussac, a well known (yet floundering) material and retail empire with several striving businesses under its umbrella — including a world-renowned prize that Arnault had desired for quite a long time: The House of Dior.
With $15 million of family money and $65 million in financing from investment firm Lazard Fr\u00e9res, Arnault shaped a holding company (Agache Financiere) and acquired the bankrupt Boussac — just because to get Dior. The highly compelling — however savage — techniques he used to pivot Boussac made Arnault known as "a force to deal with in French business."
For instance, to zero in on the two core assets that he realized he could scale — his high fashion prize and Bon March\u00e9 department store — he proceeded to make the company dissolvable by selling off the greater part of different businesses and terminating 9,000 workers. At the point when government authorities said that he had promised to preserve occupations and assets, Arnault asserted that his main pledge was to make the company profitable. These mass cutbacks earned him the moniker "Eliminator" — yet admirers congratulated him for "jumping from his family's $15 million-a-year business to a company 20 times as large."
The Cachet of a Luxury Brand
Albeit the couture division of Christian Dior was an unprofitable operation when Arnault dominated, he considered the fashion house "a fundamental element of the Dior brand cachet." Instead of stripping, he framed Christian Dior S.A. as the holding company for the couture division and started to revitalize the brand with youthful recruits that surprised the industry. In the wake of selecting the company's first non-Frenchman, Italian designer Gianfranco Ferr\u00e9, to succeed artistic director Marc Bohan, Arnault "raised a ruckus" in 1996 by delegating "reckless" British designer John Galliano to succeed Ferr\u00e9 as Dior's head. To his faultfinders, that's what arnault said "ability has no ethnicity."
To safeguard the brand image of "value and restrictiveness over quantity and availability" — another element that Arnault considered essential to the Dior cachet — he worked with his new team to cut the number of Dior licensees and franchised shops by half: "from 280 out of 1989 to under 150 by 1992."
Subsequent to securing the House of Dior as the foundation of his future empire, Arnault sent off a strategic acquisition program to assume control over exclusive brands that met his criteria for "hands down the best," including the houses of Christian Lacroix, a French fashion designer, and Celine, a calfskin goods designer, as well as Dior scent and Givenchy fashion and aroma. As he had done at Dior, he canceled licensing deals that he saw as harming the brand — a strategy that turned out to be part of the Arnault playbook on many luxury acquisitions over the course of the next 30 years.
The Takeover of LVMH
In 1987, with $500 million in cash from stripping Boussac businesses, Arnault started investing in his next luxury target: Mo\u00ebt Hennessy and Louis Vuitton, two iconic French companies that had merged into LVMH that year.
What Arnault did next is frequently refered to as his generally infamous — and fruitful — power play.
Arnault had initially invested in LVMH at the invitation of the CEO of Louis Vuitton, Henry Racamier, who wanted his backing to consolidate his position against Alain Chevalier, the CEO of the a lot larger Mo\u00ebt Hennessy. Since the merger, there had been steady fighting and legal fights among Racamier and Chevalier — which turned into the opening Arnault needed. When Racamier realized that his partner had his own aspirations, Arnault had enrolled Lazard Fr\u00e8res, the U.K. liquor goliath Guinness, and both the Mo\u00ebt Chandon and the Hennessy families to assist him with securing a 45% controlling interest in LVMH.
After Chevalier stepped down, a 18-month court fight between the two leftover contenders ended in 1989, when the courts decided in support of Arnault — and he emerged successful from "perhaps of the fiercest fight in French fashion."
When Arnault had expelled Racamier, he cleansed all the senior Vuitton executives — and afterward started to assemble his divided LVMH conglomerate into what he called a "luxury-goods supermarket." In the 1990s, as he "went on a shopping binge" to procure brands across the luxury range — from fashion, watches (TAG Heuer), and beauty care products (Sephora) to wine and spirits — he likewise expanded LVMH's presence past Europe and North America to Asia, South America, and Australia.
The Arnault Model: Balancing Financial Discipline and Creativity
Throughout the next three decades, as he brought the best luxury brands in fashion, beauty care products, and beverages under the LVMH umbrella, Arnault proceeded to make "a series of splendid business decisions" that "must be called breathtaking." Even his faultfinders were impressed by "his ability to manage imagination for profit and growth." Industry observers regularly credit his outstanding progress in a highly competitive industry to the way that — in contrast to other global CEOs — Arnault understands both the creative and the financial parts of running a luxury business.
The Creation of Star Brands
In a 2001 Harvard Business Review interview, Arnault made sense of his renowned business process, which — in contrast to the traditional fashion industry — requires financial discipline as well as imagination. The whole focal point of Arnault's teams is the creation of "star brands" that must meet a high bar for four artistic and financial criteria: LVMH brands must be "immortal, modern, fast-developing, and highly profitable." In practice, "profitable imagination" means that "star brands are conceived just when a company manages to cause products that 'address the ages' yet to feel 'intensely modern' and 'sell fast and irately, all while making gains.'"
Albeit the LVMH cycle starts with "extremist advancement — an erratic, untidy, highly emotional action" on the creative end, when "it comes to getting imagination onto racks — disarray is exiled," and the company imposes "severe discipline on manufacturing processes, fastidiously planning every one of the 1,000 tasks in the construction of one purse."
The virtuoso of Arnault's cycle is that, albeit the "front finish of a star brand — the development… the creative cycle, the advertising — is extremely, costly," the "back finish of the interaction in the atelier (the factory)" is a place of "astounding discipline and thoroughness" that drives "high profitability in the background." Brands with "unfathomably high quality" require "extraordinarily high productivity," so "each and every movement, each step of each and every interaction is carefully arranged with the most modern and complete engineering technology."
For instance, when Arnault automated production at Vuitton, he drove that revered old brand to the best position on Fashionista's rundown of the world's best-selling luxury brands in 2011, with a value of $24.3 billion — over two times the amount of its nearest rival.
As he spent "sumptuously" on advertising, Arnault "thoroughly" controlled costs by utilizing each conceivable synergy across the group: Kenzo manufactured a Christian Lacroix line; Givenchy manufactured a Kenzo fragrance, and Guerlain made the principal Vuitton scent.
Creative Talent Management
As Arnault incorporated LVMH into the world's largest luxury conglomerate, he employed new design ability for star brands that "address the ages" yet "feel intensely modern": from C\u00e9line, Kenzo, Guerlain, and Givenchy to Loewe, Thomas Pink, Fendi, and DKNY.
Because his model requires that "the counterbalance to imagination must be commerce," Arnault "never wondered whether or not to reign in, or outright end, creative executives who didn't deliver." Since the good 'ol days at Dior, he has frequently replaced creative executives with contemporary ability and afterward rearranged them across his brands to assist him with identifying opportunities to drive profit — regardless of how unpopular.
For instance, at Givenchy in 1995, Arnault brought in a "fashion industry sweetheart" and "famous wild child," British designer John Galliano, to replace Hubert de Givenchy, the industry icon "credited with defining simple polish for a whole generation of ladies, (counting) Audrey Hepburn, Jacqueline Kennedy, and the Duchess of Windsor."
In something like a year, Arnault moved Galliano, the principal British designer in French high fashion, from Givenchy to Christian Dior to replace Gianfranco Ferr\u00e9, the Italian couturier who had driven Dior design since the late 1980s. Other modern Arnault recruits included introducing 27-year-old Alexander McQueen (one more British designer) at Givenchy and Marc Jacobs at Louis Vuitton, where he gave the American designer an order to challenge LVMH's rivals, Prada and Gucci.
Albeit those iconoclastic designers later left LVMH, they had served Arnault's purpose: interest in his traditional fashion houses had been jumpstarted by the mid 21st century.
The World's Most Valuable Luxury Brands
In the decade after Arnault's takeover, as he constructed a portfolio of the best assets in luxury, the value of LVMH "duplicated fifteen times over and sales and profit increased fivefold."
Under Arnault's leadership, LVMH owned or had a stake in five of the luxury industry's ten most important brands by 2011, as per the Millward Brown Optimor BrandZ study that year. LVMH's profit engine, Louis Vuitton, accepted the best position as the world's most significant luxury brand for the 6th consecutive year, with a brand valuation of $24.3 billion — "as much as the combined values of Hermes, Gucci, and Chanel, which positioned second, third and fourth." Across industries, Louis Vuitton positioned 26 among 100 companies in 13 industries — a rundown that had Apple in the number one position.
The leader of the study noticed that LVMH had marks with "exceptionally high standards in terms of craftsmanship," which can give "the impression of extremely high eliteness, even now and again where it may not be so exclusive."
The Most Acquisitive Deal Maker in Luxury: Tiffany and Company (2020)
Subsequent to eating up prizes like the German luggage brand Rimowa in 2016 and the luxury travel group Belmond (the owner of the Cipriani Venice hotel) in 2018, Arnault solidified his reputation as "the most greedy deal maker in the luxury business" in 2019, when he announced the biggest deal in the history of the luxury sector: the $16.2-billion acquisition of U.S. goldsmith Tiffany and Company.
At the point when the 2020 global pandemic hit the luxury market not long after the announcement, months of public mudslinging and allegations of mismanagement resulted — however Arnault at last closed the deal at $420 million not exactly the original price.
As well as meeting LVMH's high bar for restrictiveness, Arnault said that he was drawn to an unusual part of the Tiffany profile: "It's the main brand (he) know(s) that possesses a variety."
The Secret of Arnault's Success
In 2019, the Financial Times described the broadly competitive Arnault as having "an impulse to possess wonderful brands and transform their imagination into profits." Within four decades, he fabricated LVMH "from a close bankrupt French material company to a global group with \u20ac46.8 billion in sales (2018)" and a portfolio of north of 70 of the best luxury brands in the world, including Louis Vuitton, Dior, Givenchy, Veuve Clicquot, and Dom P\u00e9rignon.
In 2020, a New York Times article about the Tiffany acquisition — and Arnault's unbelievable ability to win out over the competition in each deal — cited a luxury executive, who said, "His approach isn't unusual in the M&A game — it's just unusual in this industry. He gets brands the Wall Street way, however at that point he holds them. He thinks in generational terms. He's not a card shark; he's a strategist." That's what an academic in Paris said "he's not terrified of participating in a fight, however… he's continually assessing the results, and can put self image to the side in the service of the outcome" — and thus, "even when he loses, he wins."
The 2019 Financial Times article likewise refered to "first-mover advantage" as a driver of Arnault's momentous history, "eminently in China, where (he) is given a head of state's welcome when he visits." The principal Louis Vuitton in central area China opened in Beijing in the basement of the Palace Hotel in 1992, just as market-economy changes were kicking off — and there was no hot water in the hotel and bikes rather than cars on the streets, as per Arnault. As China drove luxury spending throughout the next two decades, Arnault's wagered on the infant Chinese market paid off — with LVMH as "one of the principal beneficiaries." Arnault guesses that better expectations for everyday comforts will keep on opening up new luxury markets in emerging economies around the globe.
Supporter of the Arts
A leading art collector and benefactor of the arts, Arnault's private assortment goes from Monet to Yves Klein, Chris Burden, Takashi Murakami, Doug Aitken, Matthew Barney, and Richard Serra.
As well as utilizing LVMH as a vehicle to support arts organizations and individual artists, Arnault has leveraged artists to draw in youthful consumers to LVMH brands. For instance, he recruited Richard Prince and Takashi Murakami to make Louis Vuitton satchels and Jeff Koons to design a special release package for Dom Perignon. In 2019, LVMH partnered with pop star Rihanna to make another fashion house, named Fenty, in Paris.
In Paris, where "all streets lead to Arnault," Arnault secured a permanent position in the art world in 2006 by disclosing plans for a LVMH-funded, glass-shrouded complex designed by modeler Frank Gehry, who likewise designed the Guggenheim Museum in Bilbao. Notwithstanding a permanent assortment gave from Arnault's and LVMH's art collections, the $127-million building will house the Louis Vuitton Foundation for Creation, a social institution with a mission "to underline French imagination in the world."
The Bottom Line
Since Arnault's 1989 power play to take over LVMH made him scandalous all through Europe, industry observers have credited his outstanding progress in a highly competitive industry to the way that he understands both the creative and the financial parts of running a luxury business.
On the creative end, as Arnault incorporated LVMH into a luxury empire, he has proven himself an expert at hiring design ability for star brands that "address the ages" yet "feel intensely modern." However, because his model requires that "the counterbalance to imagination must be commerce," he never wondered whether or not to reign in, or outright end, creative executives who didn't deliver. An industry insider made sense of Arnault's strategies as an approach that is "not unusual in the M&A game — it's just unusual in this industry — he secures brands the Wall Street way."
This unusual balance of financial and creative skills empowered Arnault to join the assets of a bankrupt company with LVMH and various acquired brands to make the world's most powerful luxury conglomerate — with revenues of \u20ac44.6 billion ($51 billion) by 2020.
Highlights
- Since from the get-go in his career, Arnault has drawn in both an energetic fan base and a vocal circle of pundits. To his admirers, he is a visionary entrepreneur empowering French business. To his faultfinders, he is "the wolf in cashmere."
- The selectiveness of a luxury brand is so central to his strategy that dropping licensing deals that he sees as harming to the brand has been part of his playbook since he took over Dior.
- As a young fellow exploring the U.S. market, Arnault developed desires a long ways past his family's construction and real estate business — and he started searching for an enterprise he could scale, ideally "a business with French roots and international reach."
- The highly powerful — yet savage — techniques he used to pivot Boussac, which had collapsed in the largest bankruptcy in post bellum French history, made Arnault known as "a force to deal with in French business."
- Arnault acquired Boussac, a popular (yet floundering) material and retail empire with several striving businesses under its umbrella — including a prize that he had desired for a really long time: The House of Dior.
FAQ
What amount of Dior Does Arnault Own?
Arnault has owned 100% of Dior beginning around 2017, when he paid \u20ac12 billion for the 25.9% of Christian Dior SE his family didn't currently possess — and afterward LVMH acquired all of Christian Dior Couture for \u20ac6 billion in an internal transaction. Until 2017, he had controlled Christian Dior Couture through a "complex web of ownership" that elaborate the Arnault family possessing 74.1% of the fashion house, with Arnault as the controlling shareholder and LVMH's different shareholders with no direct exposure to Dior's quick growth. His 2017 acquisition simplified the business structure and gave LVMH's minority shareholders full exposure to Dior.
What Made Arnault Focus on Luxury Brands?
Arnaud frequently refers to an early visit to the U.S. as whenever he first understood the true power of a luxury brand. At the point when he asked a New York City cab driver what he knew about France, that's what the man answered, in spite of the fact that he was unable to name the president, he knew Dior.
Has Arnault Ever Lost a Deal?
Arnault has lost a couple of deals — most broadly, Gucci in 2001 and Herm\u00e8s in 2014.- Gucci: After a decade of fruitful triumphs, Arnault lost the "satchel battle" in 2001, when his French rival, Fran\u00e7ois Pinault, assumed command over Gucci, the Italian fashion house that LVMH had been seeking after. In spite of the fact that Arnault has denied any resentment over this unusual defeat, when the Pinault family gave \u20ac100 million to reconstruct Notre Dame Cathedral after the 2019 fire, the Arnault family gave \u20ac200 million.- Herm\u00e8s: Over the next decade, Arnault kept on buying up brands like Bulgari (2011) and Loro Piana (2013) — and afterward attempted to pursue Herm\u00e8s, a very fruitful Parisian cowhide house run by the 6th generation of the establishing family, who are "savagely defensive" of keeping up with control. At the point when the Dumas family realized that Arnault had used "a stealth strategy common among hedge funds — cash-settled equity swaps" — to secure 17% of the company, they fended him off in a fight that ended in 2014, when a French court decided that LVMH needed to sell down its stake.
What Is Arnault's Net Worth?
As of April 21, 2022, Arnault had a net worth of $146 billion, which made him the third most extravagant person in the world (after Elon Musk and Jeff Bezos), as per the Bloomberg Billionaires Index.
What Does Arnault Say to Critics?
In 1989, when Arnault emerged successful from his highly argumentative takeover of LMVH, he was gotten some information about his reputation as the wolf in cashmere. He answered that his rival "was a great manager, yet there is one big contrast" that sets them apart: "I ensure I am the controlling shareholder of the businesses I am in."
