By and  on April 15, 2010

PARIS — The world’s largest luxury group plans measured expansion this year given the uncertain scale of the economic rebound and its conviction that some scarcity fuels desire.

“[This year] has started off well.…I’m confident enough. Still, I think it’s necessary to be prudent,” Bernard Arnault, LVMH Moët Hennessey Louis Vuitton chairman and chief executive officer, told the company’s annual shareholders’ meeting Thursday.

A sanguine Arnault said LVMH also plans “targeted expansion” even in emerging markets, whose fast growth helped insulate the luxury sector last year as the economic crisis led to steep declines in the U.S. and Europe.

The executive flashed a slide showing that emerging markets, lead by Asia, accounted for 30 percent of LVMH’s business last year, up from 17 percent in 2003.

Without naming names, Arnault suggested some competitors have expanded too rapidly in high-growth markets like China, diminishing the desirability of their brands. He stressed the importance of adopting a long-term approach to keep brands at the pinnacle of luxury. “We don’t want to go too fast,” he said.

Earlier this week, LVMH reported an 11.3 percent spike in first-quarter revenues, declaring an end to destocking of Champagne and watches and citing a “strong” rebound in luxury demand in the U.S. and Europe.

Pressed by shareholders for guidance for the balance of the year, Arnault said it would be tough to sustain the strong set of numbers released earlier this week, showing double-digit gains across all its business groups, including a 34 percent rise in watches and jewelry.

“I prefer to surprise you,” he teased, adding, “Hopefully, it will be a good surprise.”

Arnault certainly caught the audience off guard when he revealed that Bernadette Chirac, wife of former French President Jacques Chirac and a front-row fixture at Paris fashion shows, had accepted an invitation to join LVMH’s board.

A wave of murmurs and gasps reverberated through the packed auditorium at the Carrousel de Louvre. At the end of the meeting, 82 percent of shareholders approved Chirac’s nomination for a three-year term; 17.9 percent abstained.

Chirac’s name was put forth after nominee Hélène Carrère d’Encausse, the permanent secretary of the Académie Française and a historian, withdrew her candidacy for personal reasons.

An LVMH spokesman said Chirac, 76, was chosen for her international stature and her appreciation for French savoir faire and rapport with designers like Karl Lagerfeld. LVMH also wishes to “feminize” its board, he added.

A law in the works in France would compel publicly traded companies to have women represent at least 40 percent of their directors.

Sounding relaxed and in good spirits, Arnault trumpeted that LVMH made market share gains in 2009, saying consumers responded to “sure values” during the crisis.

In a playful tone, he urged shareholders to slather on two of the group’s best-selling skin creams: Dior’s Capture and Guerlain’s Orchidée Imperiale. “It’s in a little red pot,” he said of the former product.

Later, at the annual meeting of Christian Dior SA, holding company of LVMH and the Dior fashion house, Arnault put forth Segolene Gallienne, 33, to join that firm’s board. Gallienne is the daughter of Belgian financier Albert Frere, a co-investor with Arnault in Carrefour SA.

During an introductory video clip, Gallienne noted she is already on the board of several publicly traded companies in Belgium, including some controlled by her father. She is the second woman to be appointed to the board after Delphine Arnault and 96.1 percent of shareholders approved her appointment.

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