How LVMH, Tiffany’s new owner, became the world’s biggest purveyor of luxury

From trunk maker to luxury giant.
From trunk maker to luxury giant.
Image: Reuters/Eric Gaillard
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LVMH’s $16.2 billion purchase of historic American jewelry maker Tiffany is a characteristic move for the Paris-based company, which in less than 50 years has become luxury’s unrivaled superpower through similarly shrewd plays.

The acquisition of Tiffany, which did $4.4 billion in sales in 2018, will roughly double the size of LVMH’s jewelry and watch business, while complementing its 75 other brands spanning fashion, wines and spirits, cosmetics, and more. The deal, LVMH’s largest to date, increases its lead over its rivals. In 2018, it reported €46.8 billion ($51.9 billion) in sales, about three times the €14 billion of Richemont and €13.7 billion of Kering in their most recent fiscal years.

The origins of Louis Vuitton—the “LV” in LVMH and the largest brand in the group—date to 1854, when Louis Vuitton himself started making travel trunks. But the company’s present incarnation really dates to 1977, the year Henry Racamier began running the company. The brand by then was a long-standing symbol of luxury and prestige, but it wasn’t exactly a modern business. It had two stores and annual sales of $14 million, primarily selling luggage and handbags when Odile Vuitton, great grand-daughter of Louis, put her husband, Racamier, in charge. He had made his fortune in the steel industry, and while he didn’t know luxury necessarily, he understood business.

He vertically integrated Louis Vuitton, boosting its profit margins, expanded production, introduced new products, and opened new stores. “In 1984—only seven years after Racamier took over—sales at Vuitton had increased fifteen times, to about $143 million, and profits by almost thirty times, to about $22 million,” wrote Dana Thomas in her book Deluxe: How Luxury Lost Its Luster.

Racamier also took Vuitton public that year. Two years later, the company acquired Veuve Clicquot, the champagne maker and owner of a perfume group. Following that, he arranged the merger of Louis Vuitton and Moët-Hennessy, the wine and spirits group, forming LVMH, already a growing giant. In 1988 it bought fashion house Givenchy.

But in 1990, Racamier quit the company after losing a power struggle with LVMH’s chairman at the time, Alain Chevalier. The ultimate winner of the dispute was Bernard Arnault, the current CEO and chairman, who had aligned himself himself with Chevalier and emerged as the dominant shareholder.

Arnault’s background wasn’t in luxury either, but in 1984, he had managed to take over French textile empire Boussac, owner of Christian Dior. Arnault had set about revitalizing the Dior brand, pulling back its rampant licensing and vertically integrating it. He bought Céline, too, and would eventually integrate both companies into LVMH, though not until 2017 for Dior.

Arnault installed star designers at the company’s fashion brands, such as Marc Jacobs at Louis Vuitton, and used the spectacle of fashion shows to sell high-margin items such as fragrances and handbags. He oversaw a continuing streak of acquisitions, including Berluti in 1993, TAG Heuer in 1999, Fendi in 2001, and Bulgari in 2011 to name just a few. He was even stealthily buying up shares of Hermès before a battle with the Hermès family pushed him to spin them off in 2014.

LVMH’s purchase of Tiffany should help maintain its runaway growth at a moment when the luxury market overall is slowing down. And for Arnault, it’s a shiny new jewel in his crown. According to a research note from Cowen, only a small group of luxury brands have annual sales of more than $3 billion, including Hermès, Gucci, Chanel, and Cartier. LVMH will now own three of them.

Correction: This article has been updated to clarify that LVMH now owns three of a small number of luxury brands with sales of more than $3 billion. A previous version of this article cited Cowen’s research saying there were seven luxury brands with sales of more than $3 billion. There are more than seven such brands.