World’s Billionaires – The most profitable businesses I: LVMH

This is the first part of my blog series with the topic “worlds billionaires-The most profitable businesses”.  I will show how the world’s richest people earn their money and what their key of success is.

According to the Forbes Magazine, these are the 20 richest people in the world:

Besides the fact that these billionaires are male dominated, you will also notice that their businesses can be categorized in either: fashion industry; oil, mining or gas industry; communication and media or discount chains, which includes retailer and supermarket chains. Here you can find how many people out of the top 20 world’s billionaires are having their business in a particular field:

Retailer, Discount chains: 5/20

Fashion Industry: 4/20

Media: 3/20

Oil, Mining and Gas: 2/20

Communication: 2/20

Investment and Real Estate:  2/20

Insurance: 1/20

Casinos: 1/20

Fashion and Cosmetic Industry

What do Bernard Arnault, Amancio Ortega, Stefan Persson and Liliane Bettencourt have in common ?

Their key of success is the fashion and cosmetic industry!

Amancio Ortega is a Spanish fashion executive and founding chairman of the Spanish clothing merchandiser Inditex. He owns 59.29 % of the Inditex group (Industrias de Diseño Textil Sociedad Anónima) which includes the brands Zara, Massimo Dutti, Oysho, Stradivarius, Bershka and more.

Stefan Persson ist he chairman and main shareholder in fashion company Hennes & Mauritz (H&M), which was founded by his father Erling Persson. H&M is a Swedish global retail-clothing company, known for ist fast-fashion clothing offerings. It is the second largest global clothing retailer, just behind Inditex, and leads over the third largest global clothing retailer, which is GAP Inc.

Liliane Bettencourt is a French businesswoman and is one oft he principal shareholders of L’Oréal and with a fortune estimated at US$ 24 billion. Her business is L’Oréal, which is the world’s largest cosmetics and beauty company. Concentrating on hair care, skin care, sun protection, make-up and perfumes.

One of the most profitable business, I will focus on in this blogpost, is the Fashion and Cosmetic industry. Therefore, I choose Bernard Arnault and his story of success.

The French business magnate, Bernard Arnault, is the chairman and CEO of LVMH (Moët Hennessy Louis Vuitton), the largest luxury-products company in the world. He is the world’s 4th and Europe’s richest man and has also been named by Forbes as „the fashion person of 2011“.
LVMH is a French multinational apparels and accessories company headquartered in Paris, France. The company was formed of the fashion house Louis Vuitton and Moët Hennessy, a champagne and cognac producer. In 2011, LVMH’s total revenues were around 24 million euros compared to 2009 the total revenues increased by 25 %. LVMH controls around 60 subsidiaries that each manage a small number of prestigious brands.
Christian Dior, the luxury goods group, is the main holding company of LVMH, owning 42.36 % of its shares. Arnault, majority shareholder of Dior, is the chairman of both companies and CEO of LVMH. Arnault’s key of success is the integration of various famous aspirational brands into the LVMH group. His integration of famous brands is widespreaded-beyond LVMH’s original sector of clothing and fashion accessories. Here is a partial list including some of LVMH’S most well known brands and subsidiaries:

  • Wines and Spirits: Moet & Chandon, Hennessy, Veuve Clicquot, Belvedere
  • Fashion & Leather Goods: Givenchy, Marc Jacobs, Louis Vuitton, Kenzo
  • Perfumes and Cosmetics: Guerlain, Parfums Christian Dior
  • Watches and Jewelry: Bulgari, TAG Heuer, Donna Karan
  • Selective Retailing: Sephora, Le Bon Marché

LVMH is all about the power of brand, and its famous subsidiaries: The leather goods retailer Louis Vuitton, ist largest unit; wine and spirit producers Moet & Chandon and Hennessy cognac; fashion lines Donna Karan, Fendi and Givenchy, and watchmaker TAG Heuer.

The company’s strength owes a lot to customer loyalty – especially to Louis Vuitton, which analysts estimate accounts for about 60 % of LVMH’s earnings.

The Demand for it is so strong that Vuitton’s margin topped 45 % last year (and) its U.S. sales alone grew 38 %.

Another reason of LVMH’s success, which is stated by the blogger Curt Hazlet is that

[Even in times of recession] luxury never goes completely out of style.[…]Some individuals with deep pockets and ithers with high ambitions are always willing to spend prodigiously on common items like handbags and watches, provided they get  what they want in return: quality, fashion and the envy of their friends. It’s the kind of behavior that keeps Paris-based luxury goods retailer LVMH Moet Hennessy Louis Vuitton in the money.

Despite worldwide softness in the sale of luxury goods, LVMH has cemented its position as the world’s largest and most profitable player in the category. In order to stay there it must keep its customers loyal and its brand strong. The demand for LVMH products seem to be unshakable and it will keep growing in the future.

Our company never stops seeking to increase its value and perpetuate its model of responsible development based on a long term vision shared by every one of us in the Group.

Bernard Arnault, Chairman and Chief Executive Officer of LVMH