Big profits at luxury goods companies helped LVMH boss Bernard Arnault, who is Europe’s richest man, overtake Tesla CEO Elon Musk as the world’s richest man earlier this year. At his peak, Arno’s fortune was $200 billion. This happened thanks to the renewed interest of LVMH brands, such as Christian Dior and Louis Vuitton.
Since then, his wealth has declined and he is now second on the list of billionaires. It is likely to drop more seats as consumers begin to curb their spending on luxury goods amid economic turmoil.
LVMH’s third-quarter earnings reveal that shoppers are turning away from luxury goods — especially in the US and Europe. Group sales rose 9% to 19.9 billion euros in the period, a slower growth rate than 17% in the previous quarter, Fortune quoted.
Revenue growth was less pronounced in some of the conglomerates’ key divisions, including fashion and leather goods. Sales were also down 10% in wines and spirits, which LVMH said was a factor in “post-Covid demand normalization and continued high inventory levels at its retailers”.
One thing is clearly visible – the growth rate of luxury goods sales shows that after the COVID-19 pandemic caused people to spend on high-end goods because of savings, things are now turning around. LVMH was able to take advantage of this wave and the company saw a surge during the peak of the pandemic.
LVMH is among the largest companies in Europe by market capitalization, as well as a leader in the luxury segment and in the industry as a whole. LVMH’s results may set the tone for other brands, including Hermès and Kering, when it comes to their earnings.
One of the most profitable industries in Europe is facing a decline
Weak demand could threaten the luxury goods market
French billionaire Arnaud has a personal fortune of $169 billion, according to the Bloomberg Billionaires Index. But as chairman and chief executive of LVMH, his fortune is largely tied to the luxury conglomerate’s shares, including a whopping 97.5% stake in luxury brand Dior.
His fortune fluctuates with the ups and downs of the luxury industry. The share price of luxury stocks such as LVMH fell, which in turn reduced Arnaud’s wealth. In May, for example, the tycoon’s fortune collapsed by $11.2 billion in a day after the company’s share price took a hit.
Still, he’s managed to top Musk in wealth several times over the past year. Between 2020 and 2021, the fortune of the LVMH boss has doubled from $76 billion to $186.3 billion, according to an estimate by Forbes.
Although one of the 74-year-old executive’s five children is poised to take over Arnaud’s role, he may stay on for a while longer. Last year, LVMH raised the retirement age of its chairman and CEO from 75 to 80.
2023-10-12 14:45:20
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