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Luxury tycoons who made huge profits during the crisis

Nov. 25 06:23 am 958 read

This year's Forbes Rich List has been released, with Bernard Arnault, the owner of luxury goods giant LVMH Group, becoming the third wealthiest person in the world with a net worth of $158 billion (approximately RMB 1004.8 billion), second only to Tesla CEO Musk and Amazon CEO Bezos.

This 73 year old European richest man has always been calm and low-key, and does not like to appear in the media. Many people are quite unfamiliar with his name. But when you enter the mall, you will be surprised to find that more than half of the cosmetics and boutique counters inside are almost related to him.

This global luxury goods guru owns over 70 high-end brands, including LV, Dior, Tiffany, Givenchy, Louis Vuitton, Guerlain, and Bulgari. Many of these brands were acquired by him at low prices during crises such as stock market crashes and pandemics, earning him the title of "Wolf Wearing Cashmere Shirts".

Arnold not only absorbed the business thinking of Americans, but also possesses the unique artistic temperament of French people. He is good at hiring designers and has a deep understanding of luxury price increases and marketing strategies. He can be regarded as the godfather of a generation of classic high-end brands.

A ruthless person who cheats at the bottom of a crisis

Warren Buffett, the stock god, once said: When others are afraid, I am greedy.

In the luxury goods industry, Arnold is the big shot who maximizes greed.

In 1987, when the French stock market collapsed and LVMH's stock price plummeted, Arnault took the opportunity to buy a large number of stocks at a low price and became the largest shareholder of the company. Subsequently, he made extensive improvements to the company's personnel, business, and other aspects, step by step creating his boutique empire.

After more than 30 years of operation, Arnault has now built LVMH Group into a giant with half of the world's luxury goods. Its business covers fashion, leather goods, perfume, cosmetics, jewelry, watches, alcohol and other fields, with more than 70 brands and a far leading market share.

Even in 2021, when the global pandemic was spreading, LVMH Group's revenue still surged by 44% year-on-year to 64.2 billion euros, and its net profit surged by 156% to 12.036 billion euros, which is even better than before the pandemic.

The rapid growth of LVMH is inseparable from the large-scale bottom hunting and mergers of other brands during the Arnold crisis. Taking advantage of the economic downturn and other luxury goods companies falling into crisis, Arnold's usual technique is to use capital structure, institutional design loopholes, and intensified conflicts among major shareholder families to carry out low-cost and precise hunting of them, and then pack them into his pockets.

His classic acquisition case included buying Dior at a very low price while its parent company went bankrupt; During the Wall Street stock market crash, instigating discord among LV's major shareholders in order to buy at a low price; When Givenchy Group was in financial difficulties, it was acquired in one fell swoop.

In 2020, taking advantage of the raging pandemic and the shrinking global luxury goods market, Arnold's LV parent company completed its century long acquisition of the American luxury jewelry brand Tiffany for $15.8 billion after a major discount of 400 million, injecting new growth drivers into LVMH's jewelry business.