LVMH (Moët Hennessy Louis Vuitton) The $500 Billion Luxury Empire
Louis Vuitton, Dior, and Tiffany are some of the most popular luxury brands in the world. They are all under one roof, LVMH. Founder in 1854, they are one of the most iconic luxury brands. This singular brand is now a powerhouse of 75 brands. At the bottom of this article/blog post, I will list down all of their brands into categories.
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“I’m not that much interested by the number of the next six months. What I am interested in is the desire for the brand is the same in ten years as it is today.” — Bernard Arnault, CEO & Chairman of LVMH
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The company breaks record sales every year, including in 2022. They had $86.3 billion in revenue, up 23% from the previous year. They posted $22.9 billion in revenue in Q1 of 2023, up 17% from Q1 last year. They reached a stock price of $191.99 on May 11, 2023. Their store count quintupled between 1999 and 2022, with stores across 81 countries with over 196,000 employees globally. They are a leader in luxury by multiple measures. Other than Apple, no other company dominates their industry like LVMH. No wonder the guy we quoted earlier, Bernard Arnault, CEO & Chairman of LVMH, is the world’s richest man as of June 2023.
Pre-Pandemic, the luxury sector outperformed other categories in the global apparel market. This trend continued in 2021 and onwards. The premium and luxury segments delivered shareholder returns of 33.2% (luxury) and 18% (premium) during the pandemic. Bernard Arnault has a clear strategy for what he sees as the purpose of LVHM. He wants to create eternal brands.
History of LVMH
It started in 1837, founded by a Craftsman’s Apprentice, Louis Vuitton. At the time, the most popular modes of transportation are horse carriages, boats, and trains. Craftsmen were valuable to the working class. Eventually, he founded his house in Paris in 1854. In 1886, Georges Ferréol Vuitton revolutionized the luggage box by developing a closing system that turned travel trunks into treasure chests. In 1987, Louis Vuitton merged with Moët Hennessy. That’s where we get LVMH today.
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Between 1988 and 1995, Louis Vuitton’s CEO, Vincent Bastien, created a different strategy for the brand, becasue for him, typical business school strategies do not work in luxury. Vincent Bastien seemingly had a masterclass in luxury when he collaborated with Bernard Arnault, Chairman and CEO of House of Dior (at that time). When LVMH buys a brand, they keep the team in place. Each brand has to have its own personality. For Bastien, Arnault has a real sense of luxury. He understands fashion and art. Each time you introduce a new brand or product to him, Arnault finds the problems immediately. He has keen instincts and intuitions for luxury. Arnault is also courageous and takes risks. LVHM has an aggressive acquisition strategy. They have a diverse portfolio. It seems to play well with the strengths of Bernard Arnault as a businessman. He is good at finding “hidden gems,” undervalued companies, even those outside of the experience of LVMH as a conglomerate. His family is also well-cemented within LVMH brands. All five of his children have key management roles.
Daphne Arnault, Chairman & CEO of Christian Dior. Member of the Board of Directors and the Executive Committee of LVMH.
Alexandre Arnault, EVP of Product and Communications at Tiffany & Co.
Antoine Arnault, Vice Chairman & CEO, Christian Dior SE. CEO of Berluti. Chairman of Loro Piana. Member of the Board of Directors of LVMH.
Frédéric Arnault, CEO of TAG Heuer
Jean Arnaul, Director of Marketing & Development for Louis Vuitton Watches
Luxury is a Family Business
For Arnault, a family business in the luxury sector is the key to success. Luxury has heritage. It has a legacy. That’s what you find in this family. Even for consumers, a Tag Heuer Watch or an Louis Vuitton Bag is something you’re looking to pass on to your children, the next generation. LVMH has fast growth. Their net income surpassed $1 billion in 2004. Let’s compare that to the French luxury group Kering, then known as Pinault-Printemps-Redoute (PPR), owner of luxury brands like Gucci, YSL, and Balenciaga, which reached $1.1 billion also in 2004. Between 2009 and 2011, LVHM had a 75% increase in net income. They entered the Asian Market via Hong Kong in 1992. At that time, they had a dramatic increase in their international presence. 2003 is the earliest available earnings report for LVMH. They broke their sales record every year until 2022 (except in 2020).
For Anish Malwani, Chairman & CEO of LVMH North America, storytelling and brand-building is the key to the company’s success. Luxury is connected to feelings of accomplishment. People buy luxury bags (LV), watches (Tag Heuer), and makeup (Sephora) because they can now afford superior-quality products. They are now part of the storytelling for these brands. LVMH brands offer a wide array of price points. LV bags can be valued at thousands of dollars, while Sephora makeup can be $50 or less. That means they have a broad appeal and market as well.
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LVMH (Moët Hennessy Louis Vuitton) Owns 75 Brands?
LVMH made several acquisitions over the years. BVLGARI in 2011, 80% of RIMOWA in 2016, Dior in 2017 for $13 billion, and the largets and most recent as of writing is Tiffany & Co. in 2021 for $15.8 billion. Bernard Arnault has abeen reported to be a brutal negotiator, grinding down these business deals to the last penny. In Tiffany, they had a deal before the pandemic, but he wanted a price cut after the pandemic. Tiffany (of course) said no. He took them to court. Tiffany is a renowned jewelry brand. They trademarked a color, Tiffany Blue. As of 2023, they doubled the profits of Tiffany. They now earn a billion dollars yearly. That is the power of LVMH and Bernard Arnault.
Most people associate LVMH with luxury handbags and fashion. But their current portfolio includes multiple categories like Perfume and Cosmetics, Selective Retail, and Wine & Spirits. They own Sephora, Starboard Cruise Services, and Royal Van Lent, a premium yacht maker. Between 2005 to 2022, revenue jumped from $16.9 billion to $86 billion. That’s a whopping 500% increase.
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LVMH is a Culture Company
Leading the luxury sector is one thing. The hard part is keeping that status alive. To stay alive, you have to stay relevant. You have to create demand even in tough times. Many companies struggled during the pandemic. Even LVMH had a sharp but brief decline. But their stock grew steadily from 2020 onward after that. The LVMH consumer seems almost immune to inflation. They have raised prices in many brands, but not as much as competitors. For instance, Chanel bags are now twice as much as their pre-pandemic price. It is frustrating to consumers. That’s one of the reasons why they haven’t lost a lot of business. But let’s be real, the LVMH consumer is freakin’ rich, particularly for Louis Vuitton Bags. They have (a lot of) savings during the pandemic and still have income. They were not affected.
There was also “revenge spending” in 2021 and 2022 as many countries lifted restrictions. Brands like Louis Vuitton, Chanel, or Hermes thrived. Consumers feel a sense of safety in luxury products during stressfull times.
Bernard Arnault describes LVMH as a “culture company.” In 2022, they invested $5.4 billion in store expansion, production facility expansion, and employees. They invested $234 million in employee training alone. It was the reason they gave why prices remain high even during the pandemic. The knowhow of artisans who make LV bags and other products is very valuable for the company. That needs to be maintained. They have a program called Métiers d’Art, where they invest in apprenticeships for high school students in their factories. They are also focusing on expanding their stores and being a vertically-integrated company. Each brand controls everything from production and manufacturing to consumers point-of-sale in their stores.
Revenge (Luxury) Shopping
During the pandemic, there was extraordinary growth in e-commerce and digital channels for LVMH and many other companies. There is now a re-balancing back to brick and mortar. People are now out where they visit a luxury store, have a champagned, and touch the product before deciding to buy. For consumers, visiting the store of luxury brands is like a place of worship for them. It’s an emotional experience where they forget about price.
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Creatives Inside LVMH
Hiring diverse designers is the key in creating desirable products for their stores. LVMH nutures their designers and gives them autonomy. In a 2001 interview for Harvard Business Review (HBR), Arnault said, “I don’t have alarm bells when it comes to creativity.”
Who Dares Compete Against LVMH
For former CEO Vincent Bastien, LVMH does not have competition. For him, they are too “small.” They cannot copy LVMH. For current CEO Bernard Arnault, he thinks competitors try to imitate them, but they are not sucessful. Is there truth to what the two CEO’s think? Let’s compare LVMH to the next largest luxury conglomerate, Richemont, who owns Cartier, Van Cleef & Arpels, and Piaget, among others. They had a revenue of $20.8 billion in 2022. That is $65.5 billion less than LVMH.
Visionaries and Fashion Icons Only
Their designers are fashion icons and visionaries. Names include Kim Jones, Marc Jacobs, the late Karl Lagerfeld, Pharell, and RAF Simmons, to name a few. Arnault is a great asset manager. He acquires and fosters both brands and creative talent. He focuses on the long-term strategy, cultural relevance, and reinventing brands. Think of a brand surviving for hundreds of years, keeping the history while looking to the future.
The “Young Luxury” Crowd
The late Virgil Abloh was the Louis Vuitton men’s designer between 2017 and 2022. He introduced streetwear to the brand. It was a crucial turning point. It brought in a new generation of consumers (Gen Z and younger Millennials). The Louis Vuitton x Supreme collaboration was unexpected. It also had a strong impact. Imagine being a teenager or being in your early 20s. You think that Louis Vuitton doesn’t care about you. Maybe they think you don’t even exist. You suddenly realize that Louis Vuitton cares about you. They paid attention to you. That kind of cultural impact transforms the brand in many ways.
It is imperative to bring in younger consumers to create a sustainable fashion brand with a lasting legacy. LVMH collaborates with celebrities, fashion icons and influencers to stay relevant for the “young luxury” crowd. You can see this in their brands’ social media (especially Instagram), which had dramatic transformations in the last few years. Cool drives sales. Youth and youth cultures decides what is cool. LVMH, seemingly more than other luxury brands, have this innate ability to tap the core of youth culture. Young people feel like they can relate to LVMH brands. It doesn’t feel like mom or dad’s brand.
LVMH is Asia and China
LVMH had challenges in the China market. In 2021, after President Xi Jinping made a speech to indicate a more socialist China, $120 billion got eliminated from the luxury sector. China had partial lockdowns in 2022. It caused LVMH Asia’s revenue fell, ending up at 30%. It was the only geographic region that did not have growth. In Q1 of 2023, LVMH reported a 14% revenue increase in Asia, compared to an 8% decline in Q4 of 2022.
With economic challenges, running a portfolio of 75 brands need constant upkeep. LVMH is very exclusive, enormous, and execute in multiple categories. Fashion is challenging industry. You have to stay relevant every second. They had to be excellent at creative execution, partnerships, working with merchants, and innovate exciting new products. They have to captivate their vast consumer base. How do they create desirability (and demand)? Each of their brands have an incredible heritage. It’s a competetive advantage because you cannot build heritage overnight. It takes decades, if not centuries, to create heritage.
Longevity and Relevance in the Luxury Sector
The key to longevity in the luxury sector is remaining relevant. Innovation is also at the heart of LVMH’s long term strategy. According to experts, the future of the luxury sector is experiences. LVMH invested heavily in this category. In 2019 they acquired Belmond, that includes the Cheval Blanc Maisons and BVLGARI Hotels. Many people still don’t associate hospitality to LVMH. But they started in this category in 2000 when they acquired Miami Cruiseline Services and Starboard Cruise Services. Starboard struggled in 2022, but has since bounced back.
Sustainability
Luxury consumers have also leaned into sustainability. The resale market in luxury peaked in recent years. There was tremendous growth in the luxury resale and consignment space. Now more than ever, because of the internet, luxury consumers have visibility, knowlege, and awareness of the value of products they own (especially for LV bags). They know how much they can resell it for.
Counterfeit Luxury
As the luxury market expands, their desirability and exclusivity (creating demand) created the growing problem of the counterfeit market. It is now a half-a-trillion dollar market. LVMH partnered with Prada and Cartier to develop the Aura Blockchain Consortium, an RFID and blockchain-based tech where customers can track a luxury product throughout its lifecycle.
The Future of Luxury
In a 2022 earnings report, LVMH noted priorities to be store expansion and digital expansion backed by selective investments and cost management.
Highlighting the company’s iconic imagery is a part of its long-term success, driven by the idea of leaving a lasting legacy. The company is not looking at the next couple of years. They are looking at the next hundred.
Everytime you walk inside a luxury mall or a premier retail district, and you see a Bulgari store, a Tiffany store at the corner and a Louis Vuitton at the other side, know that this is the LVMH Luxury Multiverse, and we’re just shopping in it.
BONUS: LVMH Brands by Categories
Perfumes and Cosmetics — Sephora, Acqua di Parma, Benefit Cosmetics, BITE Beauty, Cha Ling, Fenty Beauty by Rihanna, Fresh Beauty, Parfums Givenchy, Guerlain, Kenzo Parfums, KVD Vegan Beauty, Maison Francis Kurkdjian, Make Up For Ever, Marc Jacobs Beauty, Officine Universelle Buly, Ole Henriksen, Parfums Christian Dior, Perfumes Loewe.
Fashion and Leather Goods — Berluti, Celine, Christian Dior, Emilio Pucci, Fendi, Givenchy, JW Anderson, Kenzo, Loewe, Loro Piana, Louis Vuitton, Marc Jacobs, Moynat, Off-White, Patou, Phoebe Philo, Rimowa, Stella McCartney.
Jewelry and Watches — Bulgari, Chaumet, Daniel Roth, Fred, Hublot, Gerald Genta, Repossi, TAG Heuer, Tiffany & Co., Zenith.
Wines and Spirits — Ao Yun, Ardbeg, Belvedere, Bodega Numanthia, Cape Mentelle, Chandon, Château d’Esclans, Château Cheval Blanc, Château d’Yquem, Cheval des Andes, Clos des Lambrays, Cloudy Bay, Colgin Cellars, Dom Pérignon, Glenmorangie, Hennessy, Krug, Mercier, Moët & Chandon, Newton Vineyard, Ruinart, Terrazas de los Andes, Veuve Clicquot, Volcan de mi Tierra, Woodinville.
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Selective Retailing — DFS, La Grande Epicerie, La Samaritaine, Le Bon Marché, Starboard Cruise Services
Other Activities — Belmond, Maisons Cheval Blanc, Connaissance des Arts, Cova, Investir, Jardin d’Acclimatation, Le Parisien, Les Echos, Radio Classique, Royal Van Lent.
