Word: arnault
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Ironically, Arnault may have inadvertently midwifed the creation of his chief competitor. When Arnault launched a takeover of Gucci last year, quietly acquiring more than 20% of its outstanding shares--which he still holds--and then making an $8.7 billion bid for the whole firm, Gucci struck back by emulating the very business that was trying to acquire it. Gucci CEO Domenico De Sole and creative director Tom Ford started purchasing premium fashion brands in a bid to become a luxury superpower to rival LVMH...
...Sole hints he is not done yet. "There are good opportunities," he says. "There are companies out there that can be bought. But I do have a limit. I have $2.5 billion." Unlike LVMH, De Sole indicates, he's not going to pay bust-out retail. For his part, Arnault sneers that Gucci and LVMH "are not comparable. Their sales are lower than our profits. That's like Microsoft's worrying about a start-up company...
...finding it increasingly difficult to compete against these global luxury superpowers. Tommy Hilfiger's stock has also lost luster (see box). So has Kiehl's, a 149-year-old posh beauty brand that was acquired last week by French global giant L'Oreal. In February, Klein, noting the sums Arnault has been paying and the increasingly treacherous fashion market, also put his company up for sale. Potential suitors--LVMH and Gucci among them--have shied away from Klein's privately held company because its licensing agreements would deny a buyer dominant control of its product lines...
...Arnault craves control above all else. Dubbed the "Wolf in Cashmere" by the European press, he is much more than a corporate raider of the runways. He is also the first reality-based fashionista, who pays as much attention to manufacturing costs as to designer trends. It is fitting: Arnault conducts business amid a backdrop of gallons of perfume rather than racks of couture outfits, because fashion is a sinkhole. You don't make profits from the glitzy couture collections, no matter how many lunching ladies and OPEC princesses visit your atelier...
...Arnault has built an empire on the premise that high fashion is a marketing tool for selling handbags, shoes, makeup and bottles of J'adore. He views the gaudy, celebrity-driven Paris collections as spendy advertisements for his handbags and scents. No other design house has harnessed its collections so firmly to the task of moving mountains of leather and tubs of cosmetics...