For a majority of this year so far, Elon Musk was not the world’s richest man. It was Bernard Jean Étienne Arnault.
The entrepreneur pushed Musk off his position in 2023, Forbes reported, until Musk caught up and re-established himself at the top of the list in June. Arnault’s rise to the top of the list is legendary.
The 74-year-old is known as ‘the pope of fashion’ and, infamously, as the ‘wolf-in-cashmere.’ His business tactics and strategy are legendary.
LVMH Moet Hennessy Louis Vuitton SE, which Arnault heads up as Chief Executive Officer, is the primary source of wealth for the businessman and his family.
While it is highly unlikely that the company’s namesake brands won’t strike as familiar, if they don’t, the family-run enterprise has over 70 other brands that consumers would recognise. From Tiffany & Co., Givenchy and Tag Heuer, to Sephora, Make Up For Ever and Fendi, many names of the 75 under the LVMH umbrella are legacy brands.
Catering to the 1 per cent, most of its flagship products are expensive, unique and limited in quantity. In an interview with Harvard Business Review, Arnault explained how they choose products or designs to sell.
“Our whole business is based on giving our artists and designers complete freedom to invent without limits.”
And it has paid off, big time, for the brand and Arnault. But the story of LVMH came to be the world’s biggest luxury group is almost cinematic and thrilling as Arnault went about building the empire one brand at a time.
The beginning
The mogul did not start his business journey in luxury and fashion. It was the non-glamourous industry of construction, and then real estate, which gave Arnault the money to get into luxury and fashion.
Arnault joined his father’s business after graduating as an engineer in 1971 – a civil engineering firm called Ferret-Savinel. Always one for innovation, Arnault convinced his father to change the focus of the company to real estate. The company was renamed Ferinel in 1974. Arnault led Ferinel as CEO in 1977 and then took over as Chairman in 1978.
The next couple of years marked Arnault’s journey into fashion and luxury, with the acquisition of the legendary ‘House of Dior’ (referred to as ‘Dior’ hereon).
Why Dior?
An unexpected conversation is, reportedly, why Arnault set his eyes on the renowned fashion house of Dior. According to media reports, the businessman asked a New York cabbie if he knew France’s President – Georges Pompidou at the time.
The cabbie didn’t know the French president, but famously said that he knew the House of Dior in France.
Christian Dior’s designs garnered international fame for his namesake house of fashion from its inception in the 1940s. French entrepreneur Marcel Boussac owned the couture house, among other businesses. While Dior was profitable, all of Boussac’s enterprises were facing bankruptcy by the late 1970s.
A Washington Post report published in 1978 details how a Parisian court allowed the Boussac enterprise, and ultimately Dior, to be purchased by the Willot brothers, The four sibling-owners of the Agache-Willot Group bought out Boussac for $175 million, completing the purchase in 1980.
However, in less than two years, the Boussac division in the Agache-Willot Group went bust, though Dior remained the only profitable asset. The division, which comprised a third of the company’s sales, needed $70 million in external assistance.
An NYT article published on July 7, 1981 (digitised version of article) reported, “The Agache-Willot Group, the big textile and retail organization that employs about 20,000 workers in France and includes both the Christian Dior fashion house and the ailing Korvettes chain in the United States, is in serious financial trouble.”
‘The Terminator’
Arnault, 35 at the time, had his eyes set on the jewel, Dior, and put together $15 million from his firm with $45 million from financiers Lazard Frères (now Lazard Ltd) to take over the running of the company – Financière Agache – from the Willot brothers.
Financière Agache was the springboard for Arnault’s fashion empire. Soon, he bid for and won Boussac Saint-Frères, and Dior, for “one symbolic franc” in 1984.
In his attempt to bring the books to black, Arnault laid off 9,000 workers, sold off most Boussac interests except Dior and Le Bon Marché department store. These decisions earned him the nickname ‘The Terminator.’
Arnault, who was until then just a real estate businessman moving in relative obscurity, started getting recognised in business circles for his transformative and aggressive business strategies.
To LVMH: A glamorous boardroom struggle
In 1988, Arnault was invited to invest in LVMH by the company’s chairman, Henri Racamier.
Racamier, who was married to Odile Vuitton (great-granddaughter of Louis Vuitton), brought the legendary brand into profitability after taking over in 1970. In 1987, Racamier merged Louis Vuitton with Moet-Hennessy to form LVMH to avert chances of a hostile takeover.
However, soon after the merger, Racamier got into a power struggle with Alain Chevalier, the LVMH chairman at the time. Arnault, after joining LVMH, also had issues with Racamier leading to a public and bitter hostility between the duo.
While Racamier was preparing for hostile external parties, Arnault used his business acumen to stage a coup.
This is how: A 1988 NYT report announced a deal between Guinness and LVMH. Guinness invested over $400 million in a joint venture with Financière Agache – this venture, the report added, would own a 24 per cent stake in LVMH. Agache had a 60 per cent stake in the new venture, giving Arnault huge control over the stake.
Europe’s most valuable company
In 1990, armed with the stake the Guinness-Agache venture had in LVMH, Arnault ousted Racamier from the group.
Arnault became Chairman and CEO of the LVMH group. Starting then, Arnault went on an acquisition and expansion spree with LVMH, spending over $43.6 billion over the years.
Taking over competitors and upcoming brands in fashion, tech, media and spirits over the past three decades, LVMH now has 75 brands under its umbrella with the fashion wing bringing in more than 35 per cent of their revenue. Many of these are what Arnault would call ‘star brands’.
Our whole business is based on giving our artists and designers complete freedom to invent without limits.
According to Arnault, “a star brand is timeless, modern, fast growing, and highly profitable.”
Today, the Arnault family, through Financière Agache, holds a direct Shareholder interest of 96 per cent in Christian Dior. Christian Dior in turn holds just over 41 per cent stock interest in LVMH.
LVMH is the world's biggest luxury group. With a market capitalization of close to $500 billion, it has the resources to reinvest in its brands, led by Louis Vuitton and Dior, as well as operate the most extravagant stores and recruit the best designers and celebrities to steer its houses.
Who is next?
Given that Arnault is 74 and his vast business interest, the subject of who his successor will be is a major topic of speculation. He has five children from two marriages – one daughter and four sons – all of whom are in the family business. Forbes reported that in July 2022, Arnault proposed that all five children would get equal stakes in Agache.
However, the question remains – who will take over LVMH after Arnault?
Given his special love for Dior, some experts have said that his only daughter Delphine (48) is the front-runner to head up LVMH. He named Delphine as the chairman and CEO of Dior in February this year.
Son Antoine (46) is CEO of Berluti, chairman of Loro Piana and head of communications and image at LVMH, and is also a possible contender for the role of LVMH chief.
Second son Alexandre (31) is Executive Vice President of Product and Communications at Tiffany & Co. Frédéric (28) is CEO of TAG Heuer. Jean (25) is the youngest of the brood and is Director of Marketing and Development for Watches at Louis Vuitton.
Bernard Arnault is now second on the list of richest people in the world (Bloomberg Billionaire’s Index), with a net worth of $193 billion (as of August 08).
