Bernard Arnault: How France’s richest man stays in fashion

Arnault was born in Roubaix, northern France in 1949, and after graduating with an engineering degree he joined the family construction business. At 27, he convinced his father Jean Leon Arnault to sell the building side of the firm and move the focus to real estate. Arnault junior wanted to get into the U.S., too, according to Michael Burke, chair and chief executive of Louis Vuitton.

“France was very conservative at that time. You didn’t do that, especially at this age. He was still in his twenties. And it was very unusual for somebody of his age to take those types of decisions,” he told “The Brave Ones.”

But it was Arnault’s next move that was to prove one of his most ambitious: In the mid-1980s, he lobbied the French government to let him take control of textiles company Boussac, a company 20 times the size of his family’s business. A 1989 New York Times Magazine profile hailed Arnault a “superstar who has risen spectacularly to become head of the world’s largest luxury-goods company,” aged just 40 (he is now 69), having founded LVMH two years previously.

He sold off Boussac’s assets bar fashion house Christian Dior and department store Le Bon Marché, with Dior remaining part of the businessman’s Groupe Arnault until 2017, when a two-part deal brought it under the LVMH group. But when he bought Dior, the brand was staid, according to Anna Wintour, artistic director at Conde Naste and editor-in-chief of U.S. Vogue.

“Dior was a ‘jolly Madame’ house that nice French ladies wore to lunch and it was not in any way creating fashion, making fashion. There was no excitement around it. It was very staid and very safe,” she told “The Brave Ones.” So Arnault “completely shook it up,” hiring John Galliano to be its designer (he was sacked in 2011 after a racist and anti-Semitic outburst at a Paris bar) and revamping the brand.

Now, three of Arnault’s five children are involved in the company. Antoine, 40, runs LVMH’s Italian leather goods brand Berluti and is also chair of cashmere company Loro Piana. He saw his father’s ascension as he was growing up.

“My sister and I lived the creation of the group. When we grew up, he was not in luxury, he was in real estate. To see this incredible ascension from yes, a very successful real estate entrepreneur but on a smaller scale, to this huge, incredible success,” he said. Aged 11- or 12-years-old, Antoine would see his father on TV and in the papers. “So quite early on, we understood that something was going on.”

Delphine, 43, is a director and executive vice-president at Louis Vuitton and runs the LVMH Prize for young fashion designers, while Alexandre, 25, is co-chief executive of the company’s German luggage brand Rimowa, launching a collaboration with street wear brand Supreme in April, with cases selling upwards of $1,000. Meanwhile, Frédéric, 23, is head of connected technology at Tag Heuer.

But while the business is all about the higher echelons of luxury, Arnault is not untouchable, states Antoine. “(People) imagine him in his big tower with his Excel sheets with numbers. It’s very very far from reality. His real interest is his family. Of course, he’s a workaholic. He works a lot and he loves it, but … he also has fun with it. It’s not as serious as some might think up there,” he told "The Brave Ones". Antoine also talks about the “court” that surrounds his father, where people “usually tend to agree with him.”

But that’s not how a family business makes progress: “If I do agree with him, I will tell him. But if I don’t, I will never hesitate to tell him, too. And sometimes we do disagree and it can go high up in the heating system, but it’s good, it’s important that we tell him the truth,” Antoine said.

For Arnault, this close-knit structure means the company thinks long term. “When you are in a family you have two major advantages. One is you can think long term. I see too many companies in which you have changes all the time. And especially in the U.S., you have to be all the time looking at the next quarter’s numbers.”

“What I always say to my team is I am not that much interested by the number(s) (for) the next six months. What I am interested in is that the desire for the brand will be the same in 10 years as it is today.”

Antoine attests to this. “We absolutely take no decisions based on the share price, not for LVMH ... what motivates the family is that Louis Vuitton, Loro Piana, Berluti, Dior is on top of their game.”

The second advantage is that new hires are treated like family, Arnault says. “You are not just a little person in a big thing, you are a member of the family and you will be taken care of as such.”

Arnault’s business strategy has been to hire people who can blend creativity and organization, just as he did when he worked with his father in the 1970s. “I (found) creative architect(s) to build apartment buildings, houses or office buildings with some kind of creativity and that made (it) a success.”

“In today’s business, since the 80s when I bought Christian Dior, it’s the same combination that explains success. You have to work with some of the best inventors, creators, designers and be able to market their products and create with their products, desire in the world,” he told “The Brave Ones.”

But Arnault was criticized for trying to put so many luxury brands — including those competing with each other — under one roof. “In the 90s (I) had the idea of a luxury group and at the time I was very much criticized for it. I remember people telling me it doesn’t make sense to put together so many brands. And it was a success ... And for the last 10 years now, every competitor is trying to imitate, which is very rewarding for us. I think they are not successful but they try,” he told “The Brave Ones.”

When buying a brand, Arnault works out how it can be improved and what niche it fills, such as in the case of Bulgari, which it bought for $5.2 billion in 2011. “We are really relatively small in jewelry and Bulgari was number two in the world … What we have brought … is the capacity in hiring the right people and we can also provide them with the best talent. Because the big advantage of LVMH, since the beginning, is because we are number one, because we are so diversified, we can attract the best talent.” Since buying the company, sales have tripled and profits have multiplied five-fold, Arnault claims.

What’s next for LVMH? Acquisitions may become trickier, suggests brand consultant Adamson, because younger consumers prefer smaller, more niche brands. “Entrepreneurs want to stay independent. So (LVMH’s) ability to buy new brands has been more challenging and even consumers have an increasingly sophisticated knowledge of authenticity and (wanting to know) what's the story. For many of them, small is better than big.”

He says a company like Shinola, the Detroit-based watch, bike and leathergoods company, where women’s leather bags retail from around $400, might make a good addition to the portfolio. “People love a small brand with a story, and (a) company they can look up online.”

Arnault is unafraid to pay top price for the brands he wants, says Blankfein. “He was paying full prices for things that weren’t close to what other people would want and other people scoffed that he would ever realize (their) value or earn anything from the prices he was paying … It takes a certain amount of courage to stand against the tide knowing that you’re going to … outperform the experts and the founders that created those businesses.”

But Louis Vuitton’s Burke claims that its acquisitions do pay. “Typically, within a five-year span — which is very short — with hindsight every single purchase looks like genius,” he told the Financial Times in November.

The business of luxury also has to adapt to the march of the digital means of communication. LVMH hired Ian Rogers from Apple Music as its chief digital officer in 2015 and launched a start-up incubator in Paris last month. It has had to find ways to be accessible, too, said Adamson.

“There was something magical in how they presented themselves … and now the internet makes everything transparent. So in the world of transparency, creating the mystique of luxury is much more difficult.” LVMH started its Les Journées Particulières program in 2012, opening up its production sites to the public across Europe. People can visit leather goods workshops, vineyards and fashion houses and this October will see the fourth edition of the initiative, which will include the U.S. for the first time.”