Finally my 100th post. This could be the last post as i’m finishing my first year of college. I would liket to share an interesting post about my favorite topic; ” Fashion Business”. I hope you have enjoyed all of my posts.
Amanda Perez de Arce
Mr Arnault is the chairman, chief executive and controlling shareholder of Moët Hennessy Louis Vuitton (LVMH), the world’s largest luxury group. Over the past quarter-century he has transformed a small, nearly defunct clothing manufacturer into a conglomerate that controls more than 60 luxury brands. Credit Suisse, a bank, predicts that LVMH’s combined sales will reach €27 billion ($33 billion) this year. Its profits in 2011 were €3.5 billion and its market capitalisation is a cork-popping €62 billion. LVMH is more profitable than other luxury groups. To have more information about it, visit The Economist
“LVMH is like a mini Germany,” boasts an insider. Like that country’s Mittelstand, it has built a reputation for craftsmanship and quality that people are happy to pay extra for. The difference is, the Mittelstand makes unsexy things such as machine tools and shaving brushes, whereas LVMH makes champagne, handbags and other objects of desire.
From Louis XIV to Louis V
Also like the Mittelstand, LVMH energetically pursues opportunities abroad. After years of hard marketing, it has persuaded much of Asia’s new middle class that its wares confer a whiff of European sophistication. Sales in Asia (Japan excepted) accounted for 27% of the total in 2011, up from 17% in 2001. In Japan, which generated 15% of the group’s sales a decade ago, a startling 85% of women now own a Louis Vuitton product. It takes a rare talent to be ubiquitous and yet retain an air of exclusivity.
Some didn’t object. Last year LVMH bought Bulgari, an Italian jeweller, for €4.3 billion. The Bulgari family were happy to take the cash. Their business had hit a rough patch after the collapse of Lehman Brothers in 2008, and they thought Mr Arnault would make a good sugar daddy for their brand.
Other prey tries harder to fly away. The Hermès clan is appalled that Mr Arnault is stalking their posh-bag-and-silk-scarf firm. The LVMH boss quietly amassed shares in Hermès. The Hermès family did not twig until 2010, when he revealed that LVMH owned 17% of the firm. The Hermès family have scrambled to defend their empire. A separate family holding company now owns 50.2% of Hermès shares. On May 29th Hermès announced that a family member, Axel Dumas, would succeed Mr Thomas (an outsider) as chief executive some time after 2013. And the family proposed a statute requiring all stakes exceeding 0.5% to be registered in the shareholder’s name, so that predators can be spotted from afar.
The art of the luxury makeover
Mr Arnault’s empire-building creates economies of scale. A study by the Boston Consulting Group finds that a retail brand saves around 30% of its commercial costs (advertising, rent, shop assistants and so forth) each time it doubles in size. But this is not why Mr Arnault keeps buying brands, says Erwan Rambourg of HSBC, a bank. Rather, he is driven by the belief that he can take any fine luxury brand and make it bigger, while still maintaining healthy profit margins. His record is pretty good.
In the first quarter of this year, sales of LVMH’s fashion and leather-goods division (ie, Louis Vuitton plus a couple of smaller brands such as Fendi) jumped by 18% in America, 12% in Europe and 10% in Asia. That may sound zippy, but investors were accustomed to much zippier growth in Asia. LVMH’s shares slipped on the day of the announcement.