How Vulnerable Is LVMH?

On Thursday, shares in LVMH rose 5 percent to a record market valuation of €432 billion after the luxury conglomerate reported better-than-expected quarterly sales.

Also Thursday: scores of protesters rallying against the French government’s plans to raise the retirement age flooded LVMH’s Paris headquarters. The incursion lasted just a few minutes, but images of the striking workers brandishing red flares and chanting in the lobby of luxury’s biggest group, controlled by the world’s wealthiest person, Bernard Arnault, circulated worldwide.

The dual narratives were typical of luxury’s last year. On the one hand, rebounding travel and events, a tight labour market and big cushions in the budgets of the wealthy have helped many luxury brands keep beating expectations, quarter after quarter.

But there’s always a reminder that the good times might not last: rising interest rates, sinking consumer confidence, and the abrupt collapse of the post-pandemic stock market rally last year have put the industry’s growth streak in question. Then there are the shocks to the system, from Russia’s invasion of Ukraine to China’s tightening — then reversal — of Zero Covid policies. And now, French protests.

Markets don’t seem too concerned. Shares across the sector rallied in recent weeks as several investment banks upgraded their forecasts for the industry’s growth, judging that a slowdown in the US will be manageable and possibly short-lived.

LVMH’s first-quarter revenues for fashion and leather rose 18 percent — comforting hopes of a rapid coronavirus rebound in China. Package tours, which were previously the main driver of sales to Chinese customers, have yet to rebound, but LVMH said China’s domestic market is already back to its 2021 peak and high-spending individual Chinese travellers are popping back up in international shopping hubs. Management commentary also reassured investors regarding continued growth in Europe and strategies for managing a slowdown in the US.

Earlier this month, Arnault’s fortune climbed above $200 billion for the first time amid global news coverage of France’s nationwide strikes and rallies sparked by president Emmanuel Macron’s plan to raise the retirement age, which the government has pushed ahead despite popular and parliamentary opposition.

Images of protestors clashing with police, fires on the street and heaps of trash on sidewalks due to a garbage strike might be seen as a blow for French luxury houses — many of whom trade on an idealised vision of Paris, and operate their most profitable flagship stores in the tourist hub. But French luxury companies are well practised in selling the dream while navigating messy realities.

The runaway success of Emily in Paris, Netflix’s campy and romanticised romp through the city, is a case in point for just how well established “Brand France” is, and how adept it is at shaking off dents to its image, like the destructive Yellow Vest protests in 2018 and 2019 just before the show was released.

Despite living in the eye of the storm of the current political crisis, sales to local French customers are currently growing by double-digits, LVMH said. (Outside the scheduled, police-supervised mayhem of demonstrations, life is mostly plodding ahead as usual in France, with most people working, eating, partying — and shopping—as they normally would.)

As for the protests at LVMH, an organiser stressed that the intervention on the margin of Thursday’s nationwide strike was “peaceful and symbolic.” Forcing their way into the company’s offices (as French protestors have done at other companies and banks including BlackRock in recent weeks) is a way for activists to illustrate “the fact that capitalism is neither fluid nor consensual, but is imposed by force,” political commentator Pablo Pillaud-Vivien explained.

Still, the incident was enough to spark questions about public opinion of LVMH and Arnault, who are seen abroad as untouchable champions of French industry.

As France’s (and the world’s) richest man, Arnault and his company are certainly potent symbols of rising inequality. In recent years, discourse has ramped up in France (as in the US) regarding raising taxes on billionaires for projects including fighting climate change, funding pensions and more.

But many French people’s opinions toward Arnault and his company seem to have softened in recent years. Where LVMH used to take a standoffish approach to corporate communications — preferring to hide behind its brands — it’s taken steps to burnish its public profile in recent years: promoting recruitment drives (highlighting job creation), staging open houses for its ateliers (establishing a reputation for protecting craftsmanship) — as well as sponsoring art exhibitions, start-up incubators and training programmes. The company regularly points out that it is the country’s highest taxpayer, paying out over €5 billion in French taxes and social charges last year, as well as employing over 40,000 people in the country.

While LVMH isn’t universally adored, it is broadly respected. Efforts by the group’s brands like Louis Vuitton and Dior to become more culturally relevant, particularly among young consumers, hardly hurt: Today, for every social media post and protest placard denouncing the mega-rich, there are just as many venerating their lifestyle and offering tips for how to attain it. Plenty of French people are proud that Europe’s biggest company, and the world’s richest person, are French.

Should the winds of policy ever really swing against rising inequality, LVMH will, of course, be a prime target no matter how many times they’ve opened their ateliers. But the days feel like a distant memory when, in 2011, a leading French newspaper put Arnault on its cover with the phrase “Casse toi, riche con” (politely translated as “Get lost, rich jerk”) or when François Ruffin made a national hit with his 2015 documentary “Merci, Patron!” (“Thank, Boss!”) — a political satire that featured hidden-camera footage of LVMH fixers attempting to buy off a disgruntled former worker and pressuring left-wing activists.

For now, it seems farfetched that Macron would reverse his stance on retirement reforms in favour of boosting taxes on companies and the rich. A recent push for higher taxes on the “superprofits” of some energy companies — referring to their commodity price-fuelled boom since the war in Ukraine — failed to gain traction in parliament.

Still, France’s political crisis could have negative effects long-term. Discontent with Macron has been adding fuel to the fire of protest parties like Marine Le Pen’s right wing National Rally, whose statist policies may be less friendly to big luxury. But investors seem confident in LVMH’s ability to cross that bridge if they get there: shares didn’t dip in response to the protests Thursday, and continued to rise to a record Friday morning.

Just a day after the protest, LVMH is forging ahead with plans to host a concert by Jay-Z, sponsored by Tiffany & Co., at its art foundation outside Paris Friday night. (An LVMH source underscored that it was not a private concert — the event was open to members of the public who managed to nab tickets online). LVMH seems confident, too, in its ability to keep navigating a divided world.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

LVMH sales were lifted by a strong Chinese rebound in the first quarter. Sales at the world’s largest luxury company, which owns Louis Vuitton and Dior fashion houses as well as Hennessy cognac and US jeweller Tiffany, came to €21.04 billion ($23.10 billion) for the three months ending in March.

French protestors target LVMH headquarters in Paris. Protestors taking the streets against the French government’s plan to raise the retirement age entered the group’s headquarters, calling for companies and the rich to contribute more to finance pensions.

Michael Jordan’s Air Jordans break sneaker auction record. A pair of red-and-black Air Jordan 13 sneakers worn by basketball superstar Michael Jordan sold for $2.2 million on Tuesday, setting a new record for most valuable sneakers sold at auction.

LVMH strengthens Tiffany & Co.‘s manufacturing capabilities with new acquisition. The luxury goods conglomerate has purchased a majority stake in Platinum Invest Group, a France-based jewellery manufacturing group that owns five workshops including Orest and Abysse.

Boohoo settles inflated prices lawsuit for $197 million. Manchester-based retailer Boohoo, owner of brands PrettyLittleThing and NastyGal, reached a $197 million settlement for a lawsuit accusing the retailer of inflated prices, it announced on Wednesday.

Swiss watch CEOs from Patek to Oris see slowdown after boom. The heads of some of the biggest Swiss watch brands, from Patek Philippe to Oris, said demand for luxury timepieces is starting to slow from an unprecedented industry boom during the pandemic.

Uniqlo owner expected to post a 30 percent profit rise, as investors eye China results. Second-quarter results from Japan’s Fast Retailing Co, owner of clothing brand Uniqlo, offer a window into how rapidly demand in China is recovering after the lifting of pandemic curbs.

Rent the Runway drops on downbeat full-year outlook. Rent the Runway inc. fell after it reported a downbeat outlook for the remainder of the fiscal year and named a new chief financial officer.

Uniqlo parent raises full-year outlook; sees China recovering. Uniqlo parent Fast Retailing Co Ltd reported a 16 percent jump in first-half profit and lifted its full-year outlook on Thursday, as the Japanese apparel retailer saw signs of recovery in China and strong sales growth in Europe and North America.

Britain’s Superdry considering 20 percent equity raise. The group, whose shares have fallen 37 percent over the last year, also withdrew its profit guidance of “broadly breakeven” for its current year and is now forecasting revenue in the range of £615 million to £635 million ($771-$796 million).

Hermès sees no US slowdown as sales jump 23 percent. Sales at Birkin bag maker Hermès rose 23 percent in the first quarter, above market expectations, as wealthy shoppers in China and Europe splurged on luxury fashion and accessories despite higher prices and global market turmoil.

Dr Martens warns on profit as finance chief walks. Dr Martens issued its third profit warning in five months on Friday, as it struggled with higher-than-expected costs at a new Los Angeles (LA) distribution centre. The British company also said its chief financial officer Jon Mortimore would leave once it finds a replacement.

THE BUSINESS OF BEAUTY

Forma Brands names new leadership. Former chief executive officer of the athletic apparel brand Outdoor Voices Cliff Moskowitz was named Forma Brands’ new CEO.

PEOPLE

Mary Quant dies aged 93. The trailblazing fashion designer who helped define London youth culture in the late 1950s and 1960s died peacefully at her home in Surrey, her family said in a statement.

ERL is Pitti Uomo’s next guest designer. Eli Russell Linnetz will present his brand’s Spring/Summer 2024 collection during the Florentine trade fair with a special event on June 14.

Richemont’s Dunhill names Simon Holloway as creative director. He joins the British menswear house from James Purdey & Sons, which is also in the Richemont portfolio.

MEDIA AND TECHNOLOGY

Vogue Ukraine returns to print. Over a year after the Russian invasion of Ukraine, Vogue Ukraine is back in print with a new commemorative issue. Called “The Road of Unbreakable,” it features 50 different profiles of prominent Ukrainian individuals in its portfolio titled “Heroes.”

Amazon joins generative AI race, targets tech at cloud customers. Amazon Inc. is joining Microsoft Corp. and Google in the generative artificial intelligence race, announcing technology aimed at its cloud customers as well as a marketplace for AI tools from other companies.

Alibaba units’ possible IPOs spark hot investor demand. Shares of Alibaba Group Holding Ltd.’s units that may soon become public are expected to be in high demand as the breakup unleashes value in the wake of regulatory woes, investors said.

Compiled by Sarah Elson