Bernard Arnault – USD 200 billion man

The Sun Tzu of luxury

Bernard Arnault, a French investor, businessman and art collector is the chairman and CEO of Moët Hennessy Louis Vuitton SE, commonly known as LVMH, world's largest luxury goods company. He built the LVMH empire over 30+ years ago which brings in USD 55+ billion (as of last year), employs 160K people and houses 75 brands. According to a recent Forbes report, Arnaut, a centibillionaire, is one of the richest persons in the world.

Arnault’s story begins in 1949, at his birthplace in Roubaix, France. His family owned a civil engineering company. Customarily, he began working at his father’s company once he completed his engineering. Three years later, his father made him manager of the company, when he was only 25.

In 1976 Arnault persuaded his father to sell off the construction side of the business and focus instead on real estate, he later changed the company's name to Ferinel and became president of the company, specialising in holiday accommodation.

In 1981, Arnault moved to USA with his wife and two children in opposition to the newly elected Socialist's policy of taxing the rich. Arnault went to New York, he took a taxi at the Kennedy Airport, and he talked to the taxi driver who had no idea a casual comment with this French business man would plant the seed of the biggest luxury goods group. When the taxi driver told Arnault he loved France, Arnault asked him what he knew about France, and if he knew who was the French president. The taxi driver's reply: I do not know who the French president is, but I know Christian Dior. Arnault was moved by the impact a brand created. He wanted to buy Christian Dior.

Arnault aimed for an international empire and as fate would have it -- Dior was up for sale in 1984. It was part of an ailing retail conglomerate called Boussac. In a deal with the French government, Arnault put up USD 15 million (+USD 80 million from Lazard). Inspired by KKR’s, an American Investment company that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, etc, corporate raiding style, Arnault took control of the firm and broke his promise by laying off 9K employees and selling all the assets other than Christian Dior. His aggressive style caught many in Europe off guard. Within a short span of time, Arnault turned the loss making Boussac around and making USD 112 million in profit on USD 1.9 billion in sales.

During the turnaround, fashion house Louis Vuitton was merged with Moet Hennessy, a spirits company. The new entity was called LVMH, which ended up owning Dior’s perfume business.

For much of the LVMH merger, Louis Vuitton and Moet Hennessy leaders were at odds. Arnault played them off each other and was brought in as an investor. He floated 42% of Dior to the public to get USD 520 million in cash and ended up buying ~20% of LVMH. By 1989, Arnault put up another USD 500+ million to buy a controlling stake of LVMH shares and 35% of the voting rights, thus reaching the blocking minority that he needed to stop the dismantlement of the LVMH group and was soon appointed as the Chairman of the executive management board. In the decades since, Arnault has shown an incredible ability to allocate capital. Bringing in top brands and letting them operate independently.

⦁ Swiss luxury giant Richemont

⦁ French-based Kering

⦁ French based Celine

⦁ Prestigious leather maker Berluti

⦁ French Luxury fashion house Kenzo

⦁ French perfume maker Guerlain

⦁ Spanish luxury house Loewe

⦁ Marc Jacobs

⦁ French multinational retailer Sephora

⦁ Italian jeweler Bulgari

⦁ Fine wood purveyor Loro Piana

⦁ Hotel group Belmond

⦁ Tiffany, Jewelry retailer

Many of these brands go back centuries, making their appeal nearly impossible to replicate. To stay on top he appoints the greatest designers and personally visited competitor stores to understand what was happening at the ground level.

A simple conversation with a cabbie in the US prompted Arnault to buy Dior, which further led to acquisition and thereafter growth of LVMH. His lifelong desire to have a global footprint was ultimately achieved by growing LVMH empire inorganically. Under Arnault’s leadership, LVMH has grown to become the largest company by market cap within the Euro zone – EUR 365+ billion as of November 2021.

Try to move the world. The first step will be to move yourself.

― Plato

Sources:

https://en.wikipedia.org/wiki/Bernard_Arnault#Early_life

https://www.forbes.com/sites/susanadams/2019/10/31/the-100-billion-man-how-bernard-arnault-stitched-together-the-worlds-third-biggest-fortune-with-louis-vuitton-dior-and-77-other-brandsand-why-hes-not-done-yet/?sh=768c96354efb

https://www.nytimes.com/2020/10/30/business/bernard-arnault-lvmh-tiffany-battle.html

https://r.lvmh-static.com/uploads/2021/01/lvmh-fy-2020-va.pdf