Is Arnault Inventing E Luxe?
They were unlikely visitors to the swanky Paris headquarters of the LVMH Moet Hennessy Louis Vuitton luxury-goods company: three young Swedes with a plan to sell sports apparel from a Web site featuring a sassy electronic salesclerk called "Miss Boo." But LVMH Chairman Bernard Arnault spent an hour chatting with the trio early this year, then opened his checkbook and took a stake in their London-based company, boo.com. "He likes our style," says boo.com's 28-year-old Chief Executive Ernst Malmsten.
Arnault's favorite style is aggressive. A raider whose $7.2 billion-a-year empire includes Christian Dior and Givenchy, the Frenchman now has his eye on cyberspace. Since January, he has put up more than $100 million to buy stakes in Web-related startups from London to Silicon Valley. These businesses range from mortgage lending to flower delivery--far removed from LVMH and its gold-plated brands.
RESTLESS. So what's Arnault up to? For now, he isn't saying, and his spokespeople point out that the investments are being made by his Arnault Group holding company, not by LVMH. Arnault may be trying to make a quick buck by investing in a hot business. But he also could be positioning LVMH for a push into E-commerce--a realm where luxury retailers are conspicuously absent. The knowhow he gains from an inside look could give him a big headstart. "He's in the forefront of European investing in electronic commerce," says Malmsten.
In many ways, E-commerce is a natural next step for the restless Arnault, 50, who in 15 years built the world's biggest luxury conglomerate from the ruins of a bankrupt textile company. After getting hammered by the Asian economic crisis, he has focused LVMH's efforts on the U.S., where E-commerce is spreading faster than anywhere else. One of LVMH's recent acquisitions, the upscale beauty-products chain Sephora, is opening 26 stores in the U.S. this year and is gearing up to sell online.
Even some LVMH power brands could get into the act. While the Internet can never match the sensory pleasures of shopping in a Fifth Avenue boutique, some repeat-purchase items are naturals for the Net. Shoppers who already know what they want--say, a favorite Guerlain perfume--could save time by ordering online. Fashion houses also could lure more customers into their shops by displaying their collections on the Web.
AUCTIONEER. Arnault's interest in E-commerce dovetails with high fashion's growing emphasis on casual wear--clothing that lends itself to sales over the Web because customers aren't looking for fine tailoring. Louis Vuitton, which has overhauled its once-stodgy image under the American designer Marc Jacobs, will launch a new sports line this fall.
This could be an opportune time for Arnault to make a move. LVMH profits plunged 29% last year, and Arnault suffered a personal setback this spring when his bid to acquire Gucci was blocked by his archrival, French billionaire Francois Pinault. But LVMH is perking along nicely now, with sales expected to grow at least 15% this year, to more than $8.1 billion. Although economic recovery in Asia is helping, analysts say Arnault deserves credit for slashing costs at underperforming units, such as the DFS chain of duty-free shops. LVMH is now trading at $295 a share, more than double its low point last year.
Not everyone thinks LVMH is headed for the Web. "I don't think this will be a major focus for them," says Dominique Vial, an analyst at Paris brokerage KBC Securities. Arnault might be making a straightforward investment play. He might even want to take a few shots at his rival Pinault: One of the companies he is bankrolling, icollector.com, is setting up an auction site that aims to compete with Christie's, the auction house controlled by Pinault. But Arnault has never been afraid to think big and move fast--faster than you can say "boo.com."