Bernard Arnault (#1 Forbes) & LVMH
Bernard Arnault's wealth soared to $210bn. making him the #1 on Forbes. It's interesting to see that despite LVMH not being part of the usual suspects (Apple, Amazon, Alphabet, etc.), its CEO ranks #1 on Forbes, and together with its family they managed to maintain 47.5% of LVMH's ownership. To put that into perspective, Musk has 13% ownership of Tesla while Bezos has 10% ownership of Amazon.
Another example that resembles LVMH's ownership structure is Inditex, where Amancio Ortega holds 59.3% of shares.
Here is a further read on LVMH's business model (not mine) but well explained.
Some interesting points from the linked source on LVMH:
No discounts & destroying products:
Thus, LVMH has never offered discounts on its products. After all, discounts would severely damage the image of luxury items. Moreover, customers who bought a product before a discount would be dissatisfied. By not offering discounts, a customer can be sure that the exclusivity of a product will always be preserved and that no one else will be able to buy it at a lower price so that the prestige of the item will be preserved.
Another LVMH strategy is to destroy its products. What may seem unbelievable at first glance is a pretty proven strategy for the luxury manufacturer. For example, they always release only a small number of pieces from a new collection to test how the new collection is received by customers. If the products don’t go down well with customers, they destroy a lot of the merchandise to create an artificial shortage. So there is then again more demand than supply is large and they even increase the prices of the remaining products. So the main thing here is to have as high a margin as possible and not simply to increase sales.
2/3 of buyers are children that inherited money (and below 45 years old):
A study on the composition of the luxury market from 2019 provides a detailed overview of the target group of luxury companies. The absolute majority of buyers have a household income of at least USD 125,000. Only a minority of buyers are members of the middle class. Interestingly, 60% of the customers have inherited the money. This can be explained by the fact that people who earn their wealth themselves have a different relationship with money. Inheritors tend to spend money more often. In addition, around two-thirds of luxury shoppers are under 45 years old.
Family-owned business:
Another positive aspect is that LVMH is a family-run company. The family holds 47.5% of the shares and Bernault Arnault heads the company. His children are now already managing individual segments, e.g. Alexandre Arnault is the CEO of Rimova. Thus, the successors are already being introduced to entrepreneurial activities now, so that the company will probably remain a family-run business for a very long time to come.
What's your opinion on LVMH and its CEO?
My friend runs an art/watch business and met with their son as he's leading the revival of Daniel Roth and Genta. Apparently he was really nice and a total nerd about watches! Really cool to hear.
The other really interesting thing about Arnault’s ownership stake is that he/his family isn’t the founder of LV, Moët Hennessy, or any of the portfolio brands, unlike the other examples given.
Such an incredible family of capital allocators. Makes sense how successful they'd be given they're the merchant/brand of choice for the wealthy, the inheritance stats on their customers is interesting.
Your point about rich kids making 2/3 of the buyers is very interesting. I have noticed that people who started out without money are much more cautious about spending it (obviously) even when they start to make a very good living. It's like that famine mentality never leaves them and they're always scared they'll revert back to where they were when they started even if they've become very successful.
Founders podcast did an episode about Bernard Arnault, this guy is very interesting. You should listen to it if you are interested in his background story. I would recommend the podcast to anyone, have listened to a bunch of his episodes, he also did episodes on Bezos, Zell, Vanderbilt. Jobs, Buffet etc.
Found it, thx for the recom. I will go through it this weekend.
I only listened to the David Geffen episode but I liked that podcast from just listening to that episode
I’ve listened to the Business Wars Podcast about LV vs Gucci, which depicts the takeover in an entertaining way. Will check out the founders podcast
I currently work in a direct competitor of LVMH and can give you some insight.
Simply put, Arnault was both smart and ambitious enough to recognize 'Luxury' as its own forever-category. If you look at his portfolio of companies, they all do different things (even those that are part of the LVMH namesake) and really their only similarity is that they are part of the 'luxury' category of their specific industries. As such I would call Arnault the master of luxury. And this thesis is very true. There will always be 'Luxury'. Even if in 10 years everything will be done by ChatGPT, you better believe Arnault will invest in some kind of luxury (LuxGPT) with a massively overpriced subscription while the peasants use GPT-5 for a reasonable price.
Another important point is that through all of its history he has ensured that his family retains just under 50% ownership, never allowing himself to be diluted for any reason. I would compare this against the tech CEOs who, as you mention, allow themselves to be diluted to 10% and even lower. This, of course, happens due to multiple dilutive funding rounds and massive employee stock option pools of which only a fraction go to the CEO. I would say that this portrays confidence. Arnault is confident that 'Luxury' is a forever category and as such there is no reason to dilute himself. His path to riches is just keeping his ownership %, not memeing LVMH into the next massive funding round to invest in 'AI Enabled web3 everything-app Luxury shoes'. Tech CEOs tend to do quite the opposite. I think that this is because deep down, tech CEOs know that their specific techs are not 'forever categories'. As did the previous generation of big techs, they will eventually get destroyed by the next generation of VC-funded meme tech. Think of companies like Amazon that are not even able to produce consistent profits while you better believe LVMH is literally flooding their investors with cash. As such the tech CEO's safest strategy is to slowly dilute himself with massive funding rounds + also slowly liquidating to maintain his status. The time will come when Amazon stock is worth exactly 0$ but our friend Jeffrey Bezos will still be a billionaire as he has been able to finesse the tech scene. Arnault is the complete opposite of the tech CEO in this sense, and that is what has made him so successful.
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