PARIS — Global demand for luxury goods may be slowing, but Bernard Arnault is always eyeing a bigger slice of the pie.
Speaking after LVMH Moët Hennessy Louis Vuitton reported another year of record results, the tycoon said he has no intention of breaking up his group, which posted sales of 86.15 billion euros in 2023. Rather, he’s tightening his family’s grip on its leadership and continues to eye growth.
In the latest move to prepare his succession, Arnault, who turns 75 in March, confirmed that the luxury conglomerate will propose the appointments of his sons Alexandre Arnault and Frédéric Arnault to the board at the next annual general meeting, to be held on April 18.
“It’s fashionable right now in a lot of countries to bring in younger leadership. Well, we’re getting younger too, even if I’m not planning to go anywhere either in the short term or long term. I prefer to let that be known straight away because you might ask me about it, so rest easy,” the LVMH chairman and chief executive officer told analysts and reporters.
Alexandre Arnault, executive vice president of product and communications at U.S. jeweler Tiffany & Co., and Frédéric Arnault, CEO of LVMH Watches, will join their siblings Antoine Arnault, head of communication, image and environment at LVMH, and Delphine Arnault, chairman and CEO of Christian Dior Couture, on the board.
That leaves the youngest sibling, Jean Arnault, who is in his mid-20s and is marketing and product development director for watches at Louis Vuitton. “He’s got time, he’s young,” Arnault told reporters on the margins of the press conference at the company’s headquarters in Paris.
Speaking to a small group of journalists, the executive quashed suggestions that LVMH should break up its business to unlock value for investors.
This follows an article this week by Bloomberg Opinion columnist Andrea Felsted pointing out that LVMH is trading at a steep discount to Hermès because of the disparate nature of its businesses, which include Louis Vuitton and Dior, as well as beauty retailer Sephora, but also wines and spirits, duty-free retailing and hospitality.
“I can’t consider it under any circumstances. I find it completely inappropriate,” Arnault said of the suggestion to split LVMH. “If our financial services are dynamic enough, we must significantly increase our price-to-earnings ratio without any spin-off, because that would be a mistake, since the group is built precisely on this diversity of brands.”
He said LVMH was likely to get even fatter, whether through acquisitions or organic growth. Citing another recent newspaper article during his opening speech, he said Louis Vuitton, Dior, Chanel and Hermès were considered the market leaders in soft luxury, and Tiffany, Bulgari, Cartier and Van Cleef & Arpels the top four in hard luxury.
“Among the eight brands that I consider to be the best in the world, we have half, which is already quite good. We’ll see what happens later, if we manage to expand the scope a little, or if we manage to push some other brands to join the first four,” he said.
Addressing past rumors that LVMH was interested in acquiring rival Compagnie Financière Richemont, Arnault was playful, after chairman Johann Rupert reiterated last year that he has no plans to sell Richemont or its star brand Cartier.
“I consider Mr. Rupert an exceptional leader and I have no desire to interfere with his strategy. I understand that he’s keen to remain independent,” Arnault said. “I think it’s very good and if he needs support to retain his independence, I will be there,” he added to chuckles from the room.
The executive said he expected growth to remain stable in 2024 versus the prior year. It promises to be a banner period for LVMH, which is a premium partner of the Paris 2024 Olympic and Paralympic Games.
“Personally, I’m very confident,” Arnault said. “We’re going to start to see the impact of future interest rate cuts, and I also expect a positive impact on the U.S. economy from the upcoming [presidential] election. Each time there’s an election in the U.S., the market is more dynamic.”
On the risk side, he raised the prospect of a spiraling of the conflicts in Eastern Europe and the Middle East. “That is the main concern I see for 2024. Aside from that, I think the economic outlook will be better overall for our products,” he said. “Oddly enough, the strongest demand is for the most premium products.”
He also sought to put a positive spin on the normalization of the luxury industry’s growth rates after three years of post-pandemic euphoria.
In results reported after the market close on Thursday, LVMH said like-for-like sales at its key fashion and leather goods division rose 9 percent in the fourth quarter, in line with market expectations. Arnault noted that after several years of double-digit organic revenue growth, Dior was now performing in line with the segment’s overall progression.
“We have reached a stage where we no longer need such strong growth and for me, between 8 and 10 percent is ideal,” he said, noting that he prefers to focus on the desirability of his brands with exclusive products, rather than chasing higher sales. “I would rather hit the brakes than the accelerator.”
Chief financial officer Jean-Jacques Guiony noted that the group’s average annual organic growth rate over the last 35 years was 9.1 percent.
LVMH’s sales growth slowed in the second half of 2024, although there was a slight improvement in the fourth quarter, thanks to the strong performance of its selective retailing and perfume and cosmetics divisions, and an easier comparison basis with the same period last year when much of China was in lockdown due to COVID-19.
Overall group sales were up 5.5 percent at actual exchange rates to 23.95 billion euros in the three months ended Dec. 31, following a 1 percent increase in the previous three months. This represented a rise of 10 percent on a like-for-like basis, up from the 9 percent recorded in the third quarter.
To help future-proof its strategy, LVMH kicked off the year with several senior executive changes.
Group veteran Michael Burke is set to succeed Sidney Toledano at the head of LVMH Fashion Group, overseeing Celine, Givenchy, Kenzo, Loewe, Marc Jacobs, Patou and Emilio Pucci. It is understood Burke’s stable of brands will be expanded to include Fendi.
Toledano will leave the LVMH executive committee and become an adviser to Bernard Arnault in the handover, which takes effect on Feb. 1. Arnault said Stéphane Bianchi, CEO of LVMH’s watches and jewelry division, would also move on to a new role, though he declined to elaborate.
French businessman Henri de Castries is also among the nominees to join the board, following the decision by Charles de Croisset, Yves-Thibault de Silguy and Nicolas Bazire to not stand for reelection as directors.
LVMH shares have fallen by more than 23 percent over the last six months amid a global slowdown in luxury demand. In late August, LVMH was overtaken as Europe’s most valuable listed company by Danish pharmaceutical giant Novo Nordisk, the maker of diabetes and weight-loss drugs Ozempic and Wegovy.
Its fourth-quarter report comes on the heels of mixed results for its luxury peers.
Burberry lowered its full-year profit guidance after disappointing holiday sales, but Richemont beat expectations thanks to strong demand for jewelry in markets such as Japan, mainland China and North America.
Meanwhile, Brunello Cucinelli said results in the fourth quarter were the best ever in absolute value, with sales up 15.6 percent year-over-year. Kering is due to report full-year results on Feb. 8, with Hermès International set to follow on Feb. 9.