How Louis Vuitton Became the ‘World’s Most Desirable Brand’

Small, Louis Vuitton?

That seems to be how Bernard Arnault sees it, at least. The chairman and CEO of LVMH Moët Hennessy Louis Vuitton, the parent company of the world’s largest luxury brand, said it deliberately restricts the size of the business in order to maintain its desirability.

“All we would need to do is produce more in order to double revenues. I don’t think that’s the right strategy. We want to provide our customers with an experience,” the French luxury titan said at the group’s annual general meeting, held at the Carrousel du Louvre here on Thursday.

“What interests me about Vuitton is not its size. It’s that Vuitton remain the world’s most desirable brand in 10 years’ time,” he added.

The strategy was just one of the topics he addressed in wide-ranging comments. Arnault also shot down rumors that LVMH is interested in snapping up Chanel, revealed it passed on the acquisition of augmented-reality beauty company ModiFace and again cautioned an economic crisis is looming.

Separately, Bernard Kuhn, LVMH’s general counsel, criticized animal rights organization PETA for linking the group to questionable practices in the farming of exotic skins, saying LVMH was ensuring that all its suppliers of crocodile and ostrich leather will be independently audited and certified by the end of this year.

PETA bought a stake in LVMH in 2017 to pressure the group to end its use of animal skins after an exposé of Vietnam crocodile farms. Kuhn said LVMH’s Singapore-based Heng Long tannery has stopped buying any crocodile skins from Vietnam after “reprehensible practices” were brought to light there.

The conglomerate does not break out sales for individual fashion brands, but Luca Solca, managing director of global luxury goods at Exane BNP Paribas, estimates Louis Vuitton posted revenues of 9.3 million euros ($11.5 million) in 2017. Rogerio Fujimori, analyst at RBC Capital Markets, pegged retail sales at 9.1 billion euros.

LVMH maintains strict controls on Vuitton merchandise, which is sold only in its own network of stores. The products are never marked down, and there are no outlet stores. Arnault noted that the brand struggles to keep up with demand for its bags, which include the best-selling Speedy, Neverfull and Capucines models.

During a recent visit to one of the house’s leather goods workshops in France, Vuitton officials said its bags can be produced and delivered to stores in as little as two weeks, but added that the aim is to shorten the lead time to a week. The brand plans to open two new ateliers within the next 12 months.

Arnault said Vuitton refrains from producing additional runs of sold-out models.

“We are selective. We could go much faster at Louis Vuitton,” he said. “It would be perfectly feasible, but it would be at the detriment of quality, and it would involve opening distribution, which in the long term would have serious consequences on the perception of the brand, its status, its image and its desirability.”

He added that while Vuitton is proud of regularly loaning outfits to French first lady Brigitte Macron, her endorsement has not led to a bump in sales.

Although LVMH enjoyed another record year in 2017, with revenues topping the 40-billion-euro mark for the first time, Arnault repeated his by-now customary warning that the tide will soon turn, noting that low interest rates and high stock prices could result in a market bubble.

“I am utterly convinced that in the next five years, we will inevitably have another important economic crisis, which will be the consequence of this absolutely abnormal situation in which we find ourselves,” the wealthiest man in fashion said.

“We have to be cautious. We have to take advantage of the current situation, we have to drink Dom Pérignon, but it’s not going to last forever,” he added.

On that topic: Arnault noted the good performance of the group’s wines and spirits division, including a 4 percent increase in the volume of Champagne shipped last year, quipping that even he had trouble securing a bottle of Dom Pérignon’s coveted 1998 P2 vintage, which retails for around $400 — a remark that sent titters through the audience.

“No, but it’s true! The other day, we were celebrating a birthday at home, and we couldn’t find a bottle. I had to fall back on Moët,” he said.

Among the other hottest sellers in the group is German luggage-maker Rimowa’s collaboration with New York streetwear brand Supreme, which sold out immediately after dropping in Europe and the U.S. on Thursday, he noted.

During the meeting’s question-and-answer session, Arnault was asked to comment on rumors that a senior LVMH executive had met with members of the Wertheimer family, which controls Chanel, to explore an acquisition.

“Chanel is an outstanding business, but we are not in contact with them. I don’t know who told you that, but in my opinion, it’s fake news. There’s a lot of that around, you know,” he responded.

Chanel, which rarely comments on market rumors, also dismissed the speculation. “We confirm that Chanel is not for sale and that these rumors are totally unfounded,” Chanel chief financial officer Philippe Blondiaux said in a statement to WWD.

LVMH surprised markets in October 2010 when it revealed it had amassed a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual regulations requiring firms to declare share purchases. Over the next few years, it raised its stake to 23.2 percent.

The share acquisition triggered an investigation by France’s stock market regulator and a legal battle between the two companies, which eventually signed a truce in 2014 that saw LVMH distribute its Hermès stake to shareholders.

In response to another question, Arnault said LVMH was given first dibs to buy ModiFace, the Canadian provider of augmented-reality and artificial-intelligence technology for the beauty industry but turned down the opportunity, opening the way for its subsequent acquisition by beauty giant L’Oréal last month.

“I think a company like that loses its vitality when it is bought by a large group,” he said. “Its interest and its vitality depend on having a wide variety of customers. From the moment it becomes a closed company … we were afraid it would lose its creative capacity.”

Arnault also took a moment to pay homage to Pierre Godé, who died in February after a long illness. A member of the LVMH board, Godé was seen as one of Arnault’s most trusted advisers and protectors, and played a crucial role for more than 20 years in building up the luxury goods giant.

“We miss him a lot. He was an exceptional person who contributed a lot to the constitution of the group,” said Arnault, triggering a warm round of applause.

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