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Bernard Arnault

lines on the record: 54
first: 2024-07-19
most recent: 2024-07-19
sittings or episodes: 1
sources: podcast

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“Yeah, sure. So we have a website. I'd be delighted if anyone goes on there and has a look at our holdings, our philosophy and everything, and there's contact details there if anyone wants to discuss any of these, anything we've talked about today, Clay, or anything else for that matter. And yeah, I really enjoyed it. Thank you for having me on again.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“To LMS. So, if you look at Laura Piana to take a well known example, I don't think the DNA and the way they operate is so different from LMS. And so that's why I say that you almost need to look at this at a brand level, because when you look at group level, it becomes a whole sort of different discussion. And in a way, you're not comparing like for like. You know, I think there's a lot of investors who will be invested in one of these two because they either like the capital allocation sort of angle and all of that when it comes to LBMH. And there are some people who just love the inherent qualities of the MS business. And then in some cases, like myself, there's room for both in my portfolio.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“You need to analyze the brands at brand level, but it's a holding company. And so you're partly also buying the capital allocation and all of that, right? Whereas in the case of MS, it's all about organic developments. So you're buying the business as is, and so you need to be very comfortable with that. And so I think from an investor's point of view, they're probably the two main differences that I see. There are similarities. They both seem very strongly focused on risk management. Clearly LMS more so if you look at the balance sheet, I mean, they would appear to be super conservative and culturally perhaps more sort of European in many ways. I think both of these groups are very, very good at managing risk and building a sort of robust structure. I think they're both very long-term in that they're willing to invest upfront to nurture and develop these brands. So I think there are also a number of similarities. If you look at some brands within LVMH, they are actually somewhat similar.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Do it briefly because I think Sri will, who's a good friend, I think he will do a better job at that. So, what are the key differences? One is that if you're buying Intel Vage, you're getting this sort of broad, diverse exposure to different categories and brands, right? Some investors. And once again, so this is from an investor's point of view, what are the differences? Some investors prefer that, right? Because you may not have strong views on one category or one brand. You know, in the case of MS, you're buying one brand. They are much more dependent on one category or one or two categories of products. If you have a strong sort of views on the outlook for that category or that brand, then of course that's probably the place you want to be, well, assuming it's a positive outlook, then that's probably where you want to be invested. So the sort of diversification versus concentration, I think, is key. I think the culture is another one where we've talked about the fact that LBH is clearly, you would think of as a holding company which acquires and owns a number of brands.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“That they can improve the running of the business as such. There are also benefits of running those businesses within Albium age. But I would think they're not super explicit on this, but my assumption would be that they operate similar to many other or most other businesses in that its organic investment first and then acquisition. And then thirdly, returning cash to shareholders. They haven't really been buying back shares meaningfully. So you get a dividend. Will that change at some point, possibly? But I think for now, my focus is on trying to understand when it comes to CapEx, trying to understand store network expansion and acquisition, their thinking around acquisitions.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think the challenge for the big brands in terms of reinvestment is international expansion. More of that has already been done for a brand like LV than for many of the smaller to medium sized brands in the portfolio. So I think that is one challenge. Certainly the so-called space race that we used to talk about in retail. And I think even in luxury in some markets like certainly in some parts of China, much of that has already been done. But I think you're right in principle. I don't think they're any different from most companies we look at in that if they can reinvest organically at reasonably high rates, then that would be their preference because as you say, the risk profile is very different. I think the reason they, clearly there's a limit to how much they can reinvest, especially in an industry like this. And so the sort of residual they've spent on acquisitions, anything from small to quite large in the case of Tiffany. And then thirdly, I guess with some of the acquisitions they make, apart from the fact that”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“I think we probably adopt a similar mindset to Mr. Arnold himself, although the difference being he's actively sort of influencing those sort of dimensions of the business and we're looking in from the outside, analyzing them.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“And 15 and 20 and 25 years, but of course at some point it will become a real sort of restriction. He often says, oh, I care. So let's hope it gets it right there. The second one related to the first one is succession, of course. And in a way, similarly to the question around brand equity, it's almost impossible to say today. One, what it will look like. And two, whether that's a good or a bad. So even if you had the answer, even if you knew who was taking over the business, will that be good or bad for us as investors? It's hard to say, I think the one thing we can say will probably change the profile of the business if nothing else due to the sheer scale and sort of maturity of some parts of the business. But that doesn't necessarily mean that it's not an interesting place to invest, right? So it may be that you're getting distributions. There's other ways of creating value in a business than being highly acquisitive. So we'll have to see. But they're the two things that I worry about. Now, most of what you hear relates to things like, you know, what's going on in China? What's going on with US consumption? Of course, in the short to medium term, that really matters. I keep an eye on that. But in the long term,”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“I see probably a couple of key risks. As always, you know, the most important risks are probably things that we can't imagine at that point. But if we look at the ones that I think a lot of people are sort of looking at, well, these two are related. One would be brand equity. So if you look at the individual brands, especially the big drivers, LV, Dior, maybe one or two other ones, and especially LV, coming back to what we sort of discussed earlier, I'm not necessarily saying that I have major concerns, but I think it's a real question mark because it's so significant in terms of scale and because it's become in some ways quite different from the way some other brands in the industry are run if you compare LV to an LMS, for instance, they are relatively different these days. And so that would be one of my concerns. Can they maintain desirability? Can they protect and grow brand equity? You know, when do you sort of come up against the whole growth paradox that we've discussed? And of course, Arnold would say you've been saying this for the last 10 years.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Or not, but does it sort of fit my portfolio and my return objectives and my risk sort of tolerance and all these things?”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Earlier, the strong have been getting stronger in this industry, and that has remained the case actually. So the likes of Chanel, Hermes, LV Mage, and so even in a down cycle or in a softer market, they tend to perform better. Now, that's not to say that you're always better off investing in the likes of LBH and LMS, but I think it's important to understand what you're buying into, right? Are you buying more or less earnings volatility? And maybe finally on that point, yes, there is a cycle, but if you look at something like LVMH, they're so diversified and so large and there are across categories and geographies and price points and distribution channels that you would probably expect less earnings volatility over time than you would for say caring or a richemont. And so depending on, you know, how comfortable you are with that volatility and also what type of investor you are, do you have permanent capital, right? Do you rely on distributions? All of these things. So it's not just about is this a good business?”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“They should be keep in mind that it is a cyclical industry, right? Because it's easy to forget that. One, I think, because it's part of the sort of wider consumer goods space. And one might think that there's sort of robustness there. Certainly luxury goods companies are cyclical. I think if you go back to 2020, now that was a very unusual year, that's not necessarily the cycle. That was the pandemic, right? Because the other thing to consider is that when you have a downcycle, there's also meaningful operating leverage in these businesses. So I think in 2020, LB major revenues were down 14 or 15 percent and EBIT was down almost 30% because there's a lot of fixed cost in these businesses. So yes, I think you want to keep in mind, one, that they are cyclical. Two, that there's meaningful operating leverage. So if you get a downturn, that can be quite sort of noticeable in terms of earnings. And thirdly, there's a lot of divergence. So when you refer to our mess and LVH and their growth rates in 23, they did incredibly well. And so I mentioned.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“You don't need to make aggressive assumptions here. And of course, there's a very wide range when you look at LMS trading at 45 or 50 times, and then on the other hand, you look at Verberry and the likes trading in the low teens or 10 to 15 times, you would expect high level, you would expect LVMH to be somewhere in between the two because it's a very high quality asset you're buying. But of course, it's diversified and it's large and all these things. So it probably means that the sort of growth upside when it comes to growth is perhaps not quite the same as it is for some of the smaller players or some of the turnaround cases here, but I haven't been buying this for a while. We sold a little part of our holding, but I'm perfectly happy holding on to most of it.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Some investors might have concerns. Certainly, we saw that over the last 18 months or longer in the US, luxury spending in the US, the recovery in China. So that's one thing to consider. I still think that, certainly in the case of LVMH, trading at, say, 20 times earnings, that we could argue if the earnings are slightly above or below trend. But to me, that seems like a perfectly reasonable or even somewhat attractive valuation for a business of this quality. When I do a sort of full valuation, you don't need to assume anything like the 10% organic growth rate they've had over the last decade to get upside here. You can assume mid-single digit organic growth and mid to high single digit underlying earnings growth. And it still looks relatively fair. Now we can perhaps get back to some of the risks or uncertainties. There are a few things that I'm sort of concerned about or a few significant question marks, but when I look at the business today, it just seems to be that the valuation”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think you have to look at the earnings. Where are we in the earnings cycle, right? So because a low valuation could either or seemingly, if you look at 25, I think they're trading at, say, 20 times earnings, 5% cash flow yield. In some cases, that's because investors have concerns around the business model or the growth outlook. Or in some cases, it's because it's for another reason, which is earnings are seen as being sort of unsustainably high at the moment. I don't necessarily think that's the case here, but clearly they've had an incredible run. And by they, I mean the industry. LBMH and LMS specifically are strong habit in getting stronger in this industry. So they've clearly outperformed that the industry as a whole have had a very good three to five years and certainly through the pandemic and coming out of the pandemic, earnings growth was exceptionally strong. And so I think that needs to be, you need to sort of take that into account when you look at whether trading, where the rating is currently, because I think”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Extent. And then, of course, they do pay a dividend, and share repurchases have been at least insignificant or sort of immaterial. So I don't think anyone at this point at least buys into LV Mage for the dividend payout, right? So, you know, he clearly he's looking for more deals. That's how they deploy the sort of excess cash flow they have. And I hope he can find a few more sizable deals before he steps back. Because when you look at the record, that's how much of the value is being created. taking good assets and buying them at a good or very attractive price and then improving the way they're run.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so they had a very high reinvestment rate. Certainly, if you look at the last time I did the excise, I looked at the period between the financial crisis and the pandemic, once again, to sort of take out some of the noise or volatility we've seen. And on my calculations, he deployed something like 20 billion euros of incremental capital and earned a 20% return on that, which I think is very impressive for a business this size. And so some of that is organic capex, and I think certainly the real estate sort of aspect or the physical retail aspect has been consuming increasing amounts of investment recently. But of course much of it is also acquisitions. Tiffany was a very big chunk of that. But you also had things like in that time frame like Laura Piana and Belmont. And so I think the 20% number is very impressive when you look at the overall amount of CapEx being redeployed. So it's really acquisition spend. It's store network to some”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Speculate about the fact that the whole group is too difficult to manage for anyone other than Mr. Arnold himself. It's become a very sort of diversified, sprawling group of brands across so many categories. And so there's a possibility that you could see a partial or sort of largely a breakup of the group into different divisions. We'll have to see. I think just like in the case of Berkshire, you might also see a change in the way they think about returning cash to shareholders, right? It's been a very high growth, high reinvestment rate business, just like Berkshire. And I think in both cases, you may very well see higher cash returns in the form of dividends or share buybacks. But I think it's far too early for that. And on top of that, Mr. Arnold could be around for a long time. I think he increased the retirement age to 80 years, but I wouldn't put it past him to do that again. So I think we may very well see him running this business for a while. And I would be delighted as a longstanding shareholder.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think anyone knows, I don't even know if he knows at this point, all right, and certainly the expectation is that one or more of his children will be running the business. I think you can make a sort of qualified guess to who it will not be, but I think there are one or two of them are seen as more likely candidates. Having said that, I think he's very pragmatic, right? And he ultimately, he cares about preserving the business, the empire he has built. So I think he's also in principle open to the idea of someone coming in as an outsider to run the business or at least outsider to the family. I would expect that to be someone who's already sort of working within the group. But I think that's as much as we know and as much as possibly he knows. And once again, if you look at or make a comparison with Berkshire, there's a good chance the acquisition side of things will be less exciting and add less value over the next 10 or 20 years. But that's not to say that it can't be a good investment, right? So it may certainly change character somewhat. So some people, for instance,”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“These individual 75 or 80 brands. One way of looking at it is to employ the luxury playbook we talk about last week. Now, some of these is dynamic. It's not static, right? So some of those rules might fall out or some of the things that used to characterize the luxury business perhaps no longer do. But I think on the whole, they're probably the two aspects of the business that I would really pay attention to. Some of that is difficult to put numbers on, but ultimately that should be reflected in the higher organic growth threads and the margins and the returns and all of those metrics.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“I guess ultimately, in terms of shareholder returns, what you need to look at are the same kind of metrics you'd look at for any business that will drive free cash flow. So you would look at organic growth. You would look at margins and underlying EPS growth and what have you. But I guess that's just asking a different question. What drives these metrics? What drives organic growth or margins in this case? And so the things I would keep an eye on here are often more difficult to quantify. So certainly culture is one and that becomes increasingly important as we sort of get close to some kind of succession event in this business, right? But culture, I would certainly try and understand and I would try and assess how that might evolve in terms of what is their willingness to invest upfront, what is their, as you might say, capacity to suffer, right? And then, of course, the other key aspect related to the culture is brand desirability. So you really need to understand, you know, how they manage.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Averaged about 10 organic growth. I think they ranged between 5 and 14. You know, they've seen meaningful margin. Well, for a long time, they saw very little margin expansion. But in the last three, four years, they've seen meaningful margin expansion. And so their earnings growth rates are vastly superior to some of the other names we've mentioned. Now, of course, when you talk about a 20-something percent total shareholder return keger, the starting point in terms of the rating was clearly much different, right? For both of these businesses. That is not to be repeated. But it's similarly to Berkshire in a way. We don't need a 20% plus cagure from these types of businesses for them to be attractive investments, I think.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Business and they've been much less concerned about short term financial delivery, right? And of course, it also means they've been much more true to the model we've discussed as compared to a, say, a burberry, which I think in many ways would be regarded as much more of a fashion business than much of what LVMH has in their portfolio. You know, if you look at the organic growth rate, and this is reflected in the financials. So if the overall market grows at, say, low to mid-single digits, you know, LVMH has grown organically at something like 10% over the last. Certainly if you look at the decade between the financial crisis and the pandemic. So if we sort of take some of the volatility or noise out.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Mean partly, it is the fact that they're just better businesses and better brands, right? I think ultimately that's what it comes down to. And obviously, a lot of things go into that. But I think in some ways it's a very fair reflection of the divergence in performance and the fact that clearly LV mentioned and LMS have been much more true to this luxury business model we discussed last week. You could argue that at some point that might revert, at least partially. And certainly you could see periods when these so-called turnarounds, potential turnarounds like a burberry or a swatch may do better, right? So ultimately, so what has driven that? I think the governance has been a real key difference. If you look at the family, what the family, and it's not necessarily families, but the sort of shareholder structures of the likes of LVMH and LMS have enabled them to do is to really take a long-term vision to care about brand desirability, to do what's right in the long-term interests of the”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think that's a very good point, Clay, because I think that's been their response actually from the family. I think their response has been it's all about sort of keeping that dream alive and it's all about not necessarily visibility, but awareness. It's not about selling, right? I think the idea is that you increase, we talked about this last week, you increase awareness at a higher rate than you increase sales of your products. And that's how you keep that sort of dream equation working for you. So I think it's possibly a fair argument, but I think it's too early to say what the impact on brand equity and desirability will be in the long term.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“You know, I think some of the other brands similar to Lorpiana have benefited from that as well if you look at Chanel or LMS. I find it more difficult to assess the future of a brand like LV, especially because it's such a big chunk of earnings and the value of the business. And that is something I worry about. It sort of remains to be seen. I mean, in some ways, like, you know, I was at Buffet or Monger who said about Bezos, I wouldn't want to bet against Jeff Bezos. And similarly, who am I to say that Bernardo Arnold hasn't got it right this time as well? Then I think it's one thing to keep a real close eye on because certainly according to the playbook we discussed last week, Clay, this is beginning to look slightly different from what it probably has done historically.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Internet very selectively or at the margins. You could argue they are breaking those rules to some extent or to a large extent, right? Because it's become in some ways relatively easy to access these products. If you look at the way they advertise the products or certainly they don't advertise a product, but the way they advertise a brand, the idea of not involving celebrities in your advertising, no longer holds true. And certainly the Olympics is an interesting case study in how in some ways it seems like this is now beginning to look a little bit more like a more traditional consumer goods model, right? And so I think to me it seems like they may be breaking some of these rules. Does it matter? I don't know. And it's too early to say, I think. For some of the brands, it's easier. So if we go back to Lorpiana, there I think it's more a question of current growth rates aren't sustainable because we've gone through a phase of what people call quite luxury having been sort of really in vogue.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“So I think with LBMH, you have to look at this at the brand level, right? Because they own 75 or 80 brands. So, you know, unlike Chanel or LMS, you actually have to analyze the brands individually. So some of the brands, I think, follow the playbook closely. So if you look at Laura Piana, for instance, that is a brand that is much more LMS-like in its DNA and the way they run the business. So I would argue there, they probably follow that playbook quite closely. If you look at some of the other brands like in Mark Jacobs, clearly some or many would argue it's more of a fashion brand in some respects. I guess the important thing is to look at the big brands. So if you look at LV especially, there are some rules that they seem to be breaking. Now, they may very well argue otherwise. And in addition, I don't think they care if they're breaking CAFFR's rules as long as they're growing the business, right? But if you look at things like keep the non-enthusiasts out or dominate the client or only dispute on the”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“That's probably the only thing that I would add that the sort of heritage and the legacy or the sort of fact that these are such enduring brands really matters here. And that provides real protection. We've seen in Cognac, for instance, in the US market, you know, in recent years with Duze, that you can move into these markets and take significant share. But I think so far I think certainly you compare to almost any other consumer goods category. The idea of selling Europe to the world. And actually an LVMH case, sometimes selling the US to the world if you look at Tiffany, for instance, seems to be a very successful enduring strategy.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Only comment I would make there is that certainly compared to some other or most other consumer goods subsectors, luxury goods, when they are true luxury goods businesses, I think are more resilient and are better protected against the threat of new entrants. So if you look at cosmetics over the last, you know, until three or five years ago, you look at SA Lauder and L'Oreal and I think they Clearly their growth rates in China and Asia more generally sort of camouflaged the fact that you saw a lot of new entrants in that space certainly at the sort of lower end of the market. But I think the dynamics are potentially changing there a bit now with domestic brand.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“That's very important to keep in mind. If you speak to these companies, they will tell you that the next China is still China. I mean, that remains to be seen is certainly and will now remain a very important market. Of course, a lot of people are excited about India, possibly some markets in Africa, like Nigeria, some parts of Latin America, but I think for the foreseeable future, we will have to worry about what happens in China because it's become such a significant part of the business that I'm encouraged by the fact that they have this sort of robustness. And I think in the case of LVMH, they are also consciously diversifying the business at so many levels, whether it's geographically or in terms of categories or in terms of price points or any of these things. So I think they're less exposed, certainly than they were, although it's become a bigger part of the business. But I think the risk profile is probably more comfortable with than I might have been, say, 10 years ago.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“China has been and is super important, right? So I think Chinese consumers account for if you look at the overall market, say about a third or a little bit over a third of spending. So that's Chinese consumption within and outside of China. And I think over the last two decades, China or Chinese consumption has accounted for something like two-thirds of growth in the industry. So clearly hugely important. Now, that has become less of a driver in recent years. I would argue in some ways that it's a real show of strength, that LBMH and LMS and some of the other quality or sort of top-end players in the industry like Chanel have continued to grow so strongly throughout that period, right? You could argue on the one hand it's a real issue that China is not growing at the rate it once was, but you could argue on the other hand that it's a real sign of strength that at the group level they can carry on growing at a very healthy rate despite the fact that China isn't growing at the rate it once was.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Already well managed. So, for instance, if you look at wine and spirits, for instance, they own things like Chateau de Chem or Colgan Cellars in California. These are incredible assets that are also well managed. But I think when you look at the large deals, I think there's been money left on the table for him. And I think that evolution is also important to keep in mind when you try and analyze the sort of acquisition track record.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Building something multi generational. But Bulgari is a good case study where when they acquire the business, that was a very good brand. But as we touched on earlier, the resources and possibly the sort of know-how just wasn't there. Certainly when it came to making the business truly international and sort of improving the retail experience. And so I think at the time of acquisition, the e-bit of that business was 60 million or something euros. And I think 10 years later, that number was up to something like half a billion. Now you could argue earnings were depressed at the time of acquisition. But of course, the multiple on the way in looked expensive and I think he was challenged at the time. Similarly with Tiffany, but 10 years later, you know, you've done 10x on the earnings. And so, of course, the multiple no longer looks expensive. And hopefully we'll see something similar with Tiffany. But yes, I think generally he buys good quality assets that are undermanaged. Now, in some cases, he buys good quality assets that are”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think certainly in the early days he bought not very good businesses at all because they were bargains. So, in a way, like similar to Buffett in a way, I think there's been a real, I wouldn't say transition, but there's been a gradual sort of evolution of his thinking and the way he implements his sort of empire building. I think in recent years he has been looking more, as you suggest, more at better businesses. So take the case of Tiffany, where clearly there's a very strong brand and there's a very strong distribution network, but it's undermanaged in their case, possibly partly or largely because it's in the public trading in the public markets and the governance isn't there and everything. So I think there has been an evolution there, which is important to keep in mind. And actually, that's possibly another parallel to buffet, right? I think as the whole business has grown and as the stakes have become higher, I think he's becoming increasingly focused on quality and robustness and building something.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“I mean, it makes for a great story, and I think there's such a sharp contrast between the family behind Hermes, Damasque family, because, of course, there are six generation and they've been in this business for a long time, and they're much more French, right? And so it becomes this sort of almost good versus bad kind of narrative. Now, having said that, clearly they've been incredibly successful in what they do. I don't think that they're over that still. But they're two interesting case studies in how you can build a successful business, right? We may get back to these differences. But one clearly being a very organic development and the other being sort of aggressively acquisitive.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“By taking the business off the market and providing resources and also a lot of breathing space in the way that Buffett often does, right? So I think there's a couple of things they do that can create enormous value in these businesses, which often have great brands, but they're undermanaged.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Highly unlikely to employ those sort of tactics. Arnault has been very happy to and ready to do so. And so in the case of Tiffany, for instance, there was a lot of tension before that deal ultimately closed. So I think in some cases people do not choose to sell to him, right? He comes in anyway. And certainly in the early days, I think he was also perceived as being misleading in the way he acquired shareholdings in some companies almost against the wishes of some family members or certainly without people having the full picture, right? And so he would secretly sort of build stakes in some of these businesses and he would use derivatives and what have you. But I think in the cases where there's been a sort of conscious decision to sell to Arnault, it's because he has been able to provide resources that usually family-owned businesses haven't got themselves. And I think if you take the case of Bulgaria, clearly, you know, he's done incredible things with that business. And the early evidence is they're adding a lot of value to Tiffany.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Time in America, but I think even apart from that, I think clearly his personality and his business sort of tactics are perceived as quite American. I mean, to your question, why would you sell to LV Maine? There's a few reasons. But if you look at some of the Italian businesses they've acquired, for instance, or Bulgaria is a good example, I think in their case, they clearly had a very good or great brand, but they did not have the resources in terms of financial resources or human resources to expand the brand internationally. I think often these companies have constraints in terms of building out the store base, which is still super important in this industry. And so LVMH at group level can provide the financial resource and other resources to accelerate growth, which I think is very important. It should also be said that in some cases it's been very hot. So if you look at Tiffany, for instance, it's unlike Berkshire in that sense. And I guess going back to your earlier question about some of the differences, clearly Buffett is less likely.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“A great question because if you look at the parallels to Berkshire, of course, I think it's clear to most people why you would sell to Berkshire, right? If you worry about the sort of ultimate destiny of the business you're selling, Berkshire is possibly one of the best places to leave that business. You're leaving that business in very good hands. I think most people have this sort of intuitively trust buffered to do the right thing. I think with Arno it's different certainly. Now we should keep in mind that he has also had a couple of very high profile failed attempts at acquiring businesses in the case of Gucci and in the case of ens, right? And that has certainly, I think, contributed to his reputation. I think the idea that he is more American than the rest of the sort of the French establishment or certainly the luxury establishment is partly because he's not an insider. So he did not grow up in a family or in this industry, right? He moved or shifted money into this industry when he had already been running a couple of other businesses. And he also spent some time.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“True, but if you look at caring with Gucci, or if you look at Richemont with Cartier or some of the other groups in the industry, they are even more or much more dependent on one or two brands. So it's a one-stop shop in a way. You get very broad exposure to lots of these trends in the industry and you get great management and governance at group level.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“When you look at those types of decisions, they're also taken at that level. And I think also the group is super important in terms of the culture. So attention to detail, long-term vision. You know, we often talk about Jeff Bezos and his, you know, the idea of being obsessed with the customer or the customer experience, but Arnaud is obsessed with the idea of brand equity and nurturing and developing that for the long term. So there are a number of things you're getting at group level in addition to the quality of the underlying businesses, such as LV or Dior or any of these other assets. And finally, I think as an investor or from an investor's point of view, one important aspect of this”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Think of LVMH at the group level, and that's what you're buying if you invest in LVMH. You know, the list of company, you are buying into the holding company where capital allocation takes place and where Arnold exercises influence through very sort of direct engagement with the people who run these businesses. So that's sort of, I would think of LVMA's group as I think the Berkshire analogy is very useful, right? They make decisions on clearly acquisitions or clearly major acquisitions. If you look back at the Tiffany acquisition or Belmont or Bulgari, if we go back a bit further, clearly in terms of organic capex, so they're spending very heavily, especially on real estate, and that's accelerated in recent years. So those types of decisions are, there's clearly involvement at group level. And then, of course, a less important leave, but still, when you look at dividends and share repurchases, which are not significant, but certainly”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“So, I think the way to think about LVMANG is there's a holding company, right? Because they operate something like 75 or 80 brands. And so the brands you need to analyze at brand level or possibly at category level, and they operate these 75 brands within a handful of categories, the most important being fashion and leather goods. And then you have wines and spirits, watches and jewelry. You have retailing, and you have some other activities in there. And you also have perfumes and cosmetics. So those would have to be analyzed at the brand level. Now, two of those account for a very significant proportion of revenues and earnings. So the LV brand, which is in fashion and leather goods, is almost half of group operating earnings. And then DOR is another meaningful number. So if you look at the two of those, you're probably at something like two-thirds of earnings or something. And then you have a long tail clearly of brands. But I think if you look at LBMH at the group level, you can coming back to Berkshire, you should.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“LBMH are family owned and controlled on the one hand they take a very long term view and they get exposure to all of these growth opportunities and on the other hand as we touched on already they're very good risk managers so for someone like myself who's looking to buy these exceptional businesses and hold on to them for hopefully for decades in the hope of generating well over 10% returns this just sort of fit those criteria and we could buy it at a valuation which at the time was actually very attractive certainly if you look at where it's gone today”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“So we've been invested for six, seven years. I had been familiar with the business for a number of years, but the timing of it was that there was an opportunity sort of valuation-wise. There was a bit of a sell-off and we started buying. I've always thought it's a very attractive space for a long-term investor because we talked about the luxury business model last time, right? And I think when you execute it, well, it's the kind of business model that can generate what long-term investors are looking for, which is high returns for sustained periods of time. you have tried and tested brands with significant pricing power. You've also had very healthy organic growth rates as opposed to most consumer goods sectors or categories. This is a space where you've seen much higher organic growth rates, certainly for the likes of LBMH and MS and the sort of strong or quality players in the industry. It's a combination of high returns, durability, healthy growth rates, very strong governance, right? So some of these groups include”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“He's become more visible in recent years, right? With his wealth reaching the kind of levels where it is now. And I think certainly with the Olympics, which we may get back to, but I think with the Olympics, the whole group is becoming much more visible, certainly, in the investor community, Mr. Buffett is certainly even as a European, you know, there is much more attention paid to him. And I think that's probably the way Mr. Arnold prefers it.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“That they're good friends, and I think they clearly respect and admire each other. But I think it's an interesting case study and how you can do things quite differently. And, you know, and we see so much of this in the investment world, right? You can come at things from so many different angles and run so many different types of strategies and portfolios and still achieve remarkably similar outcomes. I think he's a man worth of study. And certainly in the last few years, there's been much more light shone on him, but he's not documented in the way Mr. Buffett is, certainly.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“Or come back in fashion. So we've seen that at the personal level, clearly they're very different types of personalities. Buffett is very, or comes across as very accessible and very sort of Midwestern in the way you communicate. And he's very open about how he runs the business and how he thinks he's a real educator. And I think Mr. Arnold has an entirely different persona. He's very private. He's very steely. He doesn't like to speak in public. And when he does add the results announcements, it's very, it's usually relatively sort of scripted. And so he leaves the communication side of things to see FO and some of the brand managers. So, you know, you could argue that's at the personal level, but I think it probably it does reflect in the way that, for instance, the people who work for him running the brands. I think have somewhat more apprehension in dealing with him than the people who work for Buffett. So, you know, in many ways, there's strikingly similar. In some ways, they are strikingly different. My understanding is...”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT
“You know, the people who are sort of left to oversee the business when he is no longer there, you know, the money will be going to charitable purposes, right? As he says, that money will go back into society. Mr. Arnold clearly has a different idea of what he wants to do with the sort of incredible amount of wealth he has generated. So he is very intent on passing that on to his children and building a multi-generational business in the same vein as an LMS or others in this space. So I think that's one important difference. You know, although Buffett is very long term, he clearly sells businesses or at least financial holdings from time to time. And I think we've seen perhaps more of that in recent years. Mr. Arnold almost never sells anything. He's a real collector, right? So when people say buffet is long term, you know, you should really look at Arnold because he is incredibly long term. And in fact, he, I think part of his sort of philosophy is that he holds on to the good and the bad businesses because the bad businesses sometimes become good business.”
2024-07-19 · We Study Billionaires · TIP645: The King of Luxury: Bernard Arnault & LVMH w/ Christian Billinger · IDENTIFIED FROM THE TRANSCRIPT