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How Vulnerable Is LVMH?

This week, shares soared after luxury’s biggest player reported another quarter of better-than-expected results. But protesters flooding Paris’ tony shopping streets penetrated LVMH’s headquarters — sounding the alarm for luxury’s political climate.
Scores of protesters rallying against the French government's plans to raise the retirement age flooded LVMH's Paris headquarters.
Protestors in Paris marched past LVMH’s La Samaritaine department store Thursday as part of the 12th day of strikes against retirement reform. (Getty Images)

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.



LVMH is cracking down on counterfeits. Shutterstock.

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.

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Compiled by Sarah Elson

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