LVMH and the Man Behind the Curtain- Part One

The Louis Vuitton Monogram

The fashion industry is largely defined by an underlying paradox: it purports to define what is the style of the moment, and yet the most famous and financially viable entities in the industry, are those with the richest heritage. Predicting the future, while living in the past.

As I continue to learn more about the 'business behind the business' I have seen that the true fashion industry is an artful mix of pie charts and pressed garments, of supply chains and supple fabrics, and is as much margin of return as it is hem of a skirt. The truth is that for all the artful pomp and circumstance that goes into the monthly spread in Vogue or the season runway show, the reality is that the industry is consistently expanding and contracting as aging fashion houses are priced or managed out of the industry, while other firms succumb to outside management--quite often by Wall Street brokerage firms who focus more on the bottom line, than the A-line cut. In short, an industry of artistic expression has become an industry of dollars and cents. Yet despite the hedge fund take-over of mainstream fashion, one man stands poised to defy the Wall Street-minded take-over of high fashion operations. Bernard Arnault is the driving force behind the mega-conglomerate LVMH. To many, he is the many working the machine behind the curtain that is the great Oz of European fashion labels. Mr. Arnault is as fascinating as he is simplistic, as advanced as he is traditional, and in that sense, is an excellent topic for further exploration. That said, this will be the first in a three-part series analyzing the overarching umbrella of the LVMH group and its various brands; the story behind Mr. Arnault's ascendance to the fashion thrown; and the fascinating way in which he has integrated tradition and heritage of his own lineage in the future management of these fabled three hundred year old fashion houses.

When I saw the letters LVMH, I knew not what the company stood for, but only what words each of the letters represented. Assuming that any highly successful company had a person at the helm who ran the company with an iron fist and others who listened and took direction.  One only knows what they know, and upon looking a little deeper and reading a little more, I discovered that I not only like the company on the outside by way of the many products it produces, but I really like the concept and heart behind the curtain on which the company is ran.  

LVMH, or Louis Vuitton Moët Hennessy, was founded in 1987 as a result of the merger between Moët Hennessy and Louis Vuitton, which became the world leader for luxury goods. The conglomerate has five distinct groups covering many aspects of the luxury market: wine & spirits; fashion & leather goods; perfume & cosmetics; watches & jewelry; and selective retailing, with the oldest of the   now 60 companies dating back to 1743.   

The mission statement and group values are simple: be creative, aim high, have passion in what you do and strive to be the best.  Woven into these core values is an interest to maintain the heritage of each individual brand and company as a whole, but to also progressively prevent a stagnant product.  They balance the dichotomy of tradition and innovation impeccably.

What I found most interesting is that the company lives their product.  By this, I mean that many of their textile groups create products such as bags, jewelry and watches that can be handed down from generation to generation, creating heritage.  What an incredible gift, for a boy to receive a TAG Heuer watch from his father on his wedding day or for a girl to receive a Louis Vuitton or Dior leather bag that has seen the world on her mother's shoulder upon her graduation from a University? Interestingly enough, the company runs on heritage, through Bernard Arnault, his six confidants and his children.

LVMH owns Dior clothing, shoes and bags

Mr. Arnault gained control of the LVMH in 1989 when his children were young, 12 and 14 respectively.  Throughout the process, Mr. Arnault would explain the steps to his children, verbally educating them on the business of the brand.  Later, he would spend Saturday mornings taking them into the retail shops owned by LVMH, furthering their education by showing them how business was done.  Neither were pressured into working for the company, but both were interested and heard from their father "If you want to work for me, you have to work harder than the others and do well in school." Both children, Antoine and Delphine, earned jobs within the company by starting in a retail store, working their way up and ultimately being promoted to an executive position.

The Fresh line of products falls under the
Perfumes/Cosmetics line of LVMH

Even in the tough economy, the LVMH has continued to grow financially, open in more markets internationally and acquire more brands, most recently a 20.21% stake in Hermes.  This is a significant as purchase as Hermes is family run and remains one of the last stand alone luxury brands not owned by a larger group.    Why have they continued to grow? Because the strategy is brilliant: put an outpost in places like Vietnam, Phnom Penh, Cambodia and Abu Dhabi, where the luxury market is non-existent.  Be the first kid on the block, where the overhead is low and demand is high, which makes for an excellent profit margin.

The company will continue its growth and people all over the world, in remote villages and metropolis' alike will find themselves coveting a product from the well-known brand.  LVMH, like any company, marks its success on the overall revenue at the end of the fiscal year, but what stands out in my mind, is that it prides itself on the making behind and the maintenance of its heritage.