| 12.2°C Dublin

French billionaire plots Covid comeback

Saturday insight

Close

Moving forward: Workers press on with renovations at the Samaritaine luxury department store. Photo: Cyril Marcilhacy/Bloomberg

Moving forward: Workers press on with renovations at the Samaritaine luxury department store. Photo: Cyril Marcilhacy/Bloomberg

Moving forward: Workers press on with renovations at the Samaritaine luxury department store. Photo: Cyril Marcilhacy/Bloomberg

In his ninth-floor office on Paris's Avenue Montaigne, Europe's wealthiest man, Bernard Arnault, is spending long hours plotting a post-virus future for his luxury goods empire, LVMH. At 71, the billionaire has lived through several crises, but none quite like this one, with his stable of more than 70 brands - from Dior to Fendi - hit from all sides.

Arnault's wealth has plunged. With LVMH shares down 19pc this year, his net worth has shrunk by more than $30bn (€27bn) - losing more money than any other individual in the world, according to the Bloomberg Billionaires Index. As of May 5, he had lost about as much money as Amazon boss Jeff Bezos had gained.

Undeterred, Arnault has been heading to his war room every day, where he's fighting to keep a blockbuster acquisition and a couple of large real estate projects on track, while holding video calls with deputies as they prepare to reopen factories and boutiques in a virus-shaken world.

"He's putting himself in a position to keep taking share once the market gets back to growth," said Mario Ortelli, founding partner of luxury consultancy Ortelli & Co.

Since the late 1980s, Arnault has dazzled - and at times scandalized - the rarefied world of French business with his prodigious flair for turning the creativity and craftsmanship of Europe's oldest brands into a windfall of ever-growing profits.

His flagship Louis Vuitton brand is estimated by analysts to have a profit margin as high as 45pc. The mark-ups on that brand's monogrammed trunks and handbags, as well as from other golden-goose products like Hennessy Cognac and Dom Perignon Champagne, have helped fuel Arnault's expanding presence in most things rich people spend money on. Whether they buy a Fendi handbag, a Bulgari watch, or stay at Venice's Hotel Cipriani, they're adding to Arnault's coffers.

Close

The Samaritaine luxury department store

The Samaritaine luxury department store

The Samaritaine luxury department store

But as the coronavirus outbreak and lockdown measures to contain it plunge the global economy into its worst crisis since World War II, being the number one beneficiary of discretionary spending suddenly doesn't look so hot.

Most of Arnault's fashion boutiques around the world have shut down for more than a month, leading to billions in missed revenue in his most profitable division.

The maker of a fifth of the world's Champagne is selling a lot less of it with parties and concerts cancelled and nightclubs and restaurants closed. J'adore Dior perfume is less of a priority for the world's masked masses.

In the midst of all that, Arnault is on the hook to pay $16bn for Tiffany & Co in what was billed as the luxury industry's biggest-ever acquisition.

Close

Bernard Arnault. Photo: Christophe Morin/Bloomberg

Bernard Arnault. Photo: Christophe Morin/Bloomberg

Bernard Arnault. Photo: Christophe Morin/Bloomberg

Daily Digest Newsletter

Get ahead of the day with the morning headlines at 7.30am and Fionnán Sheahan's exclusive take on the day's news every afternoon, with our free daily newsletter.

This field is required

"What's happened with Covid-19 is a perfect storm for luxury," Ortelli said. "You've got a contraction in GDP along with an increase in uncertainty."

Still, investors would be writing Arnault off at their own peril. LVMH shares have fared better than those of Gucci-owner Kering and watchmaker Richemont, which have fallen 25pc and 30pc, respectively. Arnault's brands, their juicy margins, and his cash pile of about €9bn give him the flexibility not just to ride out the crisis but to keep expanding, experts say.

Historically, Arnault has made a career out of investing through downturns when his competitors were too weakened or too skittish to forge ahead. The recession in the early 2000s saw him squeeze Prada Group out of its shareholding at his newly-acquired Fendi brand. "You could divide the world's top billionaires into highly successful risk managers and highly successful risk takers; Arnault is a highly successful risk taker," said Pauline Brown, the former chairman of LVMH Americas. "When he feels momentum and long-term potential, he uses the resources he has to go after it aggressively."

What's perhaps extraordinary, however, are the investments that Arnault still plans to maintain. With the outlook for international tourism still cloudy, LVMH is sticking to its plan to reopen the Samaritaine department store in Paris as a duty-free shopping hub and luxury hotel. Construction has resumed with the €900m project now targeting a possible February opening.

LVMH also plans to build a Cheval Blanc luxury hotel on Rodeo Drive, Los Angeles.

Steps away from Arnault's war room, the hiss of hydraulic lifts and the thuds of hammers can be heard behind scaffolding-wrapped windows at Christian Dior's founding boutique on Avenue Montaigne.

With Arnault's blessing, the storied house is forging ahead with plans for a sweeping renovation that will triple its size - yet another bet that the industry will rise again.

Bloomberg

Visit our Covid-19 vaccine dashboard for updates on the roll out of the vaccination program and the rate of Coronavirus cases Ireland


Most Watched





Privacy