Surrounded by hundreds of decanters of Dior's latest fragrance, J'adore, Bernard Arnault, 50, swivels in an ergonomic chair at the head of a metallic gray conference table on the 16th floor of midtown Manhattan's new LVMH tower. Forget Calvin, Ralph and even Giorgio or Miuccia--this narrow-faced, thin-lipped, dimpled Frenchman is the most powerful person in fashion today.
As founder and president of luxury-goods conglomerate LVMH Moet Hennessy Louis Vuitton, Arnault controls, in addition to the eponymous leather goods and spirits brands, Christian Dior, Givenchy, Celine, Kenzo, Christian Lacroix, Tag Heuer, Dom Perignon, Ebel, two Paris department stores, the DFS duty-free chain and the Sephora perfumery-shops, among other brands. Lately, he has been acquiring new companies at the rate of one a week: Bliss, Hard Candy, Fendi, Pucci, Urban Decay. "We look for hot companies, still small," says Arnault in his accented English, his voice a clipped tenor. "No one can do as much with a hot brand as we can."
Few people can do more with any brand than Arnault, who has built LVMH into a $40 billion company and amassed a personal fortune estimated at more than $6 billion. In the process, he has turned an industry that once consisted of hundreds of small, family-run companies into one dominated by a few luxury conglomerates, of which LVMH is pre-eminent. No other fashion brand is big enough to bid against him. Except one: Gucci.
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.
So far it has worked. Gucci is arguably a hotter brand than any in the LVMH stable. And Gucci is seeking to bestow its panache on shoemaker Sergio Rossi and fallen couture house Yves Saint Laurent, in a series of deals valued at more than $1 billion. "We are going to apply our own business model to YSL," De Sole promises, "going from a licensed-type situation to a controlled situation." Last week YSL announced it would be cutting its licensing agreements from 160 to about 50 to protect the value of its brand. It doesn't hurt that Ford, arguably the premier designer in fashion, will be the creative director of the sleeker, sexier Yves Saint Laurent. And De 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."
Both Gucci and LVMH have been in fashion with investors, in part because Asia's recovery is viewed as a boon for sellers of swank. Gucci's stock, at $84.81, is off 33% from its 52-week high but still well above the $60 it was trading at a year ago, while LVMH, which trades in Paris, is up to $411 a share after reporting $8.4 billion in 1999 revenue, a 23% jump from last year.