PARIS — Quoting big thinkers ranging from Einstein to Steve Jobs, Bernard Arnault treated shareholders of LVMH Moët Hennessy Louis Vuitton to a nearly hour-long lesson in how to succeed in business.
Addressing a crowd of hundreds that spilled over into a second room at the Carrousel du Louvre here, the French group’s chairman and chief executive officer preached the vital importance of creativity, quality and long-range thinking, pooh-poohing “marketing” as an approach ill-suited to the sector.
This story first appeared in the April 17, 2015 issue of WWD. Subscribe Today.
“If we do that, we are no longer in luxury,” he said, noting business students often quiz him on that management process. “LVMH is an example for the French economy.”
Paraphrasing Einstein’s assertion that imagination is more important than knowledge, the lanky 66-year-old executive stressed that the “capacity to bring newness” remains the group’s most vital fuel, trumpeting the importance of “creativity that’s pragmatic.”
“It’s not about creating dresses to put in museums,” he said, sounding sanguine as he addressed the hushed room, images of runway fashions, leather goods, perfumes and Champagne bottles projected onto the wall behind him. “What we do is create desire in our clients, and attract them to our products.”
He cited his pride and joy, the new Frank Gehry-designed Louis Vuitton Foundation, as the ultimate example of pragmatic creativity, with its “astonishing exterior” of swooping glass panels cloaking a rational, functional interior of stacked galleries.
Arnault noted the art museum has already welcomed more than 600,000 visitors since it opened last October, and touted it as a project that has burnished the reputation of not only LVMH, but of Paris and France also.
Jobs, the late founder of Apple, was invoked when Arnault spoke about the LVMH group’s entrepreneurial spirit, and the corporate culture he’s instilled — one of vigilance and continual self-questioning, knowing that fortunes in business can turn on a dime. He reminded the crowd that the California computer company, while today considered the world’s most valuable firm, was on the verge of bankruptcy back in 1997.
While he spoke at length about the Vuitton brand’s elevation and modernization plan led by Nicolas Ghesquière, artistic director of women’s collections — and noted that its sales in April were “even better” than the “good start” in the first quarter — he also lavished attention on a broad spectrum of LVMH’s portfolio of some 60 labels.
He invoked Château d’Yquem, a Sauternes wine whose roots stretch back to the 15th century, as an example of the virtue of long-term thinking over the three-month rhythm of financial scrutiny publicly traded companies face.
And he talked up Jonathan Anderson, whom LVMH tapped in 2013 to helm Loewe while taking a 46 percent stake in his signature J.W. Anderson brand. Arnault noted that the 30-year-old from Northern Ireland — while hailed for his influential runway fashions — seems to have a knack for designing leather goods, the cash-cow category for Madrid-based Loewe.
He also touted a “very good year” for Loro Piana, remarking on its counter-intuitive strategy of no advertising, relying on “word of mouth” for its fashions made of high-quality cashmere and other rare fibers.
Arnault spoke frankly about the slowdown in China, ongoing currency volatility and sluggishness in Europe as question marks hanging over 2015. However, he also accentuated “extremely promising” prospects in the United States, where luxury goods purchases have been accelerating, and noted that the group’s mainland Chinese clientele continues to grow, even if they spend more time abroad than at home, driven by price differentials and a weak euro and yen.
Lower gas prices and interest rates also set the stage for strong consumer spending, while Arnault stressed the need for careful monitoring for any reversal of trends that might dampen improving consumer and investor sentiment.
While Vuitton has slowed its pace of store openings and entered a phase of enlargements and refurbishments of existing units, such as the Avenue Montaigne location in Paris, Arnault noted how the strategy is bearing fruit and yielding higher sales per square foot.
He also called attention to Vuitton’s collaboration last fall with six “iconoclasts” — Karl Lagerfeld, Cindy Sherman, Rei Kawakubo, Christian Louboutin, Marc Newson and the architect Gehry — on limited-edition leather goods in its monogram canvas.
“Everything sold,” he enthused, calling it a “big, big commercial success” hinged on “original, emblematic products” available within a limited window, fanning “maximum desirability.”
In a similar vein, demand for the mini trunk bags that were among Ghesquière’s first creations continues to outstrip the production capacity. While Arnault lamented the stock shortages of the labor-intensive bags, “it’s a very good sign for the long-term evolution of this brand.”
Questioned about the group’s digital strategy, Arnault rattled off Vuitton’s presence on social media including app-du-jour Snapchat, highlighting that traffic to the brand’s Web site far exceeds what’s possible in physical stores.
He noted brands set their own e-commerce policies, while predicting that “the more years that pass, the more products will sell on the Internet.” Moreover, he characterized digital capabilities — including click-and-collect options — as an essential component of the elite experience of buying luxury goods. “These are services very demanded by the client,” he said.
The executive downplayed the likelihood of acquisitions in the next few years, noting that companies with substantial scale, savoir-faire and growth potential — of the ilk of Bulgari and Loro Piana, LVMH’s last two megabuys — are rare.
“I’m not sure there are many left,” he shrugged, while calling attention to a new investment vector for the group — start-ups — mentioning LVMH’s minority investment last year in Italian fashion designer Marco di Vincenzo.
Arnault opened his address by paying homage to Yves Carcelle, the dynamic French executive who spearheaded Louis Vuitton’s transformation into a global powerhouse, who died last September at age 66.
In a video clip, Arnault’s son Antoine, who helms Berluti and Loro Piana, said the group would stage a third edition of its Les Journées Particulières initiative in early 2016, inviting the general public to visit workshops for a host of LVMH brands across Europe. The 2013 edition attracted more than 120,000 people to leather goods ateliers, perfume labs, vineyards and other production sites.
Earlier this week, LVMH reported a 16 percent lift in first-quarter revenues to 8.32 billion euros, or $9.39 billion, with the increase in organic terms standing at 3 percent and reflecting strong currency tailwinds.
Financial documents distributed at the meeting show that the Arnault family controls 46.6 percent of shares in LVMH, and 62.6 percent of voting rights.
And despite the cost saving of Loro Piana’s no-ad policy, the group invested heavily in communications and promotions, which last year totaled 3.48 billion euros, or $4.63 billion, representing 11.5 percent of sales.