Bernhard Arnault, the billionaire chief executive of the world’s biggest luxury goods company, LVMH, has had a memorable few months.
In November, the French dealmaker realized a long-held dream by clinching a $16 billion takeover of storied U.S. jeweler Tiffany’s. Then, in January, a surge in the value of his family’s stake (amounting to 47%) in LVMH briefly made him the world’s richest person. Oh, and the company he runs bought a tennis-ball-sized diamond, the second-biggest gem of its kind ever unearthed.
Feast your eyes on the Sewelo diamond.
But things have suddenly become more complicated for the urbane Monsieur Arnault. Just as the LVMH shares were hitting all-time records highs, news emerged of the coronavirus outbreak in China, the company’s fastest growing market.
Arnault, LVMH’s chief executive, was unruffled by the viral threat when questioned by analysts at the company’s annual results presentation on Jan. 28. “Let’s not panic,” he said. “Let’s analyze the situation calmly.”
The severity of the business impact, he said, would depend on however long the outbreak lasted. “If it’s resolved over the next two, two-and-a-half months, then it won’t be all that bad. If it were to last two years, it would be a totally different matter.” (Rival luxury brand Kering, owners of Gucci, made similarly vague reassurances).
“Wolf in cashmere”
The sangfroid is to be expected from a businessman who has been nicknamed “the wolf in cashmere” and “the emperor of luxury” during a lifetime of hard-nosed dealmaking that has seen him grow a struggling French textiles company, bought for a symbolic one franc in 1984, into the dominant luxury goods player with a market value of $230 billion.
Arnault sits atop a sprawling empire that is a veritable who’s who of luxury brands. LVMH’s drinks brands include Hennessy cognac and Moet & Chandon champagne, while in fashion and leather goods it owns Louis Vuitton, Loewe, Berluti, Christian Dior and Kenzo. Its perfumes include Guerlain and Givenchy while its watch and jewelry brands include Chaumet, Bulgari, Tag Heuer and Hublot.
LVMH’s annual results last month did not break out revenue from China but it said Asia, excluding Japan, accounted for 30% of LVMH’s revenue last year. That was despite what the company called a “difficult environment” in Hong Kong, which was rocked by months of anti-government protests last year. But that’s far from the full story; Chinese consumers typically make most luxury purchases abroad.
The coronavirus outbreak, which has killed more than 1,100 people, has not only emptied out luxury boutiques in China, it has prevented many affluent Chinese from traveling abroad.
Arnault presented last month bumper results for 2019 with LVMH revenues rising 15% to €53.7 billion ($58.5 billion) and group share of net profit rising 13% to €7.2 billion ($7.8 billion).
LVMH’s strong performance has driven the company’s shares up by more than 40% in the last year. But it’s down 7% since mid-January, which is eating into his immense personal wealth.
World’s richest…for a moment
The Arnault family’s controlling stake in the company turned Arnault briefly in December and again in January into the world’s richest person. But the drop in LVMH’s share price as the coronavirus crisis deepened has reduced Arnault’s fortune and dropped him down the list.
According to Forbes’ real-time billionaire’s list, Arnault currently ranks third among the world’s wealthiest, with a fortune of $110.2 billion, behind Microsoft co-founder Bill Gates on $112.7 billion and Amazon’s Jeff Bezos on $131.8 billion.
Arnault insists that making quality products is his main concern, not pursuing growth for its own sake.
“What we want is to continue to produce quality products and satisfy our customers. Growth is good. It delights the shareholders. I’m also a shareholder, so I can’t say that I look askance at it, but it’s not really the objective,” he told analysts.
At 70, Arnault’s ambition to come out on top burns as strongly as ever.
Last November, Arnault sealed the biggest ever deal in the luxury goods industry, snapping up U.S. jeweler Tiffany & Co, which he had long coveted, for $16.2 billion. When the deal completes later this year, LVMH will bring global heft to Tiffany, an 183-year-old company made famous by Audrey Hepburn in the classic 1961 movie “Breakfast at Tiffany’s.”
Louis Vuitton, part of Arnault’s empire, announced another audacious acquisition in January when it revealed it had bought, for an undisclosed price, the 1,758 carat Sewelo diamond, the world’s second largest rough diamond. The purchase of the gem, which will be cut into smaller stones, underlined Louis Vuitton’s ambitions in the most exclusive segment of the jewelry business.
It is second only to the 3,107 carat Cullinan diamond, found in South Africa in 1905. Several of the diamonds cut from that stone form part of the British crown jewels.
Arnault was again in the limelight after fire ravaged Paris’ ancient Notre Dame cathedral last April. LVMH and the Arnault family pledged 200 million euros ($218 million) to rebuild the Paris landmark the day after the blaze.
In 2019, LVMH also linked up with singer Rihanna to launch a new fashion label.
Born into a family of industrialists in Roubaix, northern France in March 1949, Arnault attended local schools before going on to study at France’s prestigious Ecole Polytechnique.
He began his career as an engineer with the Ferret-Savinel construction company, which his family owned, becoming chairman in 1978. In 1984, he took control, for a single franc, of the troubled Boussac textile company that owned the Christian Dior brand.
He turned Christian Dior into the cornerstone of his fledgling empire. In the late 1980s, Arnault built up a large stake in LVMH, which had recently been formed from the merger of Moet Hennessy and Louis Vuitton. He has been chairman and CEO of LVMH since 1989.
Since then, acquisitions have followed thick and fast, including Kenzo, Guerlain, Loewe, Marc Jacobs and Sephora.
He has had setbacks. One of the biggest was in 1999 when PPR, now called Kering, bested LVMH in a takeover battle for the Italian luxury brand Gucci.
Married with five children, Arnault is a well-known modern art collector, owning works by Pablo Picasso and Henry Moore.
And, yes, he enjoys playing tennis.
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