Put the “Nepo Babies” in charge of the luxury business

At Louis Vuitton, the most urgent task now is to appoint a new menswear creative director to succeed the late Virgil Abloh. Hospitality is another opportunity after Belmond’s $2.6 billion ($3.7 billion) acquisition four years ago. The company plans to open the first Louis Vuitton hotel in Paris.

Alexandre Arnault is a senior executive at Tiffany.

Alexandre Arnault is a senior executive at Tiffany.Credit:GC images

Maintaining a listing brings discipline and access to the capital markets. LVMH is expected to have net cash for the next year, according to Bloomberg analysts’ estimates. But the ability to tap into shareholders would be useful if a big takeover like Chanel, which could be valued at around €150 billion, becomes available.

But there are risks for LVMH.

The first is succession. That’s some way off at the moment, as LVMH last year raised the age limit for its CEO, allowing 73-year-old Arnault to lead one of his children or split the responsibilities between the five children by the time he turns 80.

If Arnault were to pick one of the younger sons, Alexandre, 30, who holds a senior position at Tiffany, or Frederic, 28, who runs Swiss watchmaker Tag Heuer, he could emulate Prada and appoint a non-family member as acting CEO, and they’re ready to take over. LVMH also has a cadre of top executives like Burke, Beccari (if he does well at Louis Vuitton) and Group Managing Director Antonio Belloni who would be safe hands.

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Whichever structure is chosen, the process must be managed carefully: the division of CEO responsibilities opens up the possibility of conflict between siblings.

With LVMH increasingly in a league of its own, another danger is complacency. The backdrop also looks more sophisticated. Investors are betting on a return of Chinese consumer revenge spending now that they can travel, but the next few months will be volatile. Meanwhile, the US luxury market is slowing.

And LVMH is in the fashion business, after all. Not only is it a notoriously fickle industry, but the desire to stay current can lead to faux pas that turn off buyers.

Such dangers seem remote, but the board, which includes some French corporate heavyweights, must be vigilant in identifying problems and raising them with the family. Strengthening corporate governance with more non-family members wouldn’t hurt either. Three years ago, Kering SA appointed former Credit Suisse Group CEO Tidjane Thiam and actress Emma Watson to its board, although it’s debatable how much benefit this has brought as the Gucci and Balenciaga owner weathered a difficult period .

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LVMH shareholders have had a remarkable ride so far. But as the luxury landscape darkens, they should be more than just passive travelers — and get their Louis Vuitton-monogrammed luggage to work.

Bloomberg

https://www.smh.com.au/business/companies/put-the-nepo-babies-in-charge-of-the-luxury-business-20230115-p5ccl1.html?ref=rss&utm_medium=rss&utm_source=rss_business Put the “Nepo Babies” in charge of the luxury business

Brian Lowry

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