Dior and Louis Vuitton encouraged to “slow down their growth” in 2024

During the announcement of LVMH’s annual results on Thursday, January 25, the French conglomerate’s chairman, Bernard Arnault, once again highlighted “the outstanding performance of the ‘Fashion & Leather Goods’ division,” which achieved a total revenue of €42.16 billion in 2023, marking a 9% increase compared to the previous year and a remarkable 14% organic growth. In particular, the executive extensively praised the remarkable achievements of its two crown jewels, Christian Dior and Louis Vuitton.

“These are two of the world’s largest brands in the realm of soft luxury, with Chanel and Hermès as their primary competitors,” commented Bernard Arnault, adding Tiffany & Co. and Bulgari to the list in the hard luxury segment, two other heavyweights, who themselves face competition from Cartier and Van Cleef & Arpels of the Richemont Group. “Among the world’s strongest brands, we already possess half of them, which is quite commendable. We shall see whether we can expand this scope a bit or fortify our other brands,” continued the entrepreneur.
 
While the group did not disclose the results of each of its houses, it did specify that “the growth of Christian Dior Couture falls within the average of what is publicly disclosed.” Therefore, the house aligns itself with the upward trajectory of the ‘Fashion & Leather Goods’ sector, much like Louis Vuitton. Furthermore, chief financial officer Jean-Jacques Guiony emphasized that “the historical organic growth rate of the group over the past 30 years has been 9.1%, corresponding to the desired growth.”

The leaders of the world’s number one luxury conglomerate strongly emphasized the need to maintain reasonable growth at around 8 to 10% during the annual results conference. This new perspective aligns with the current phase of normalization affecting the high-end market after three years of post-Covid euphoria.

Jean-Jacques Guiony had already emphasized this in October last year during the group’s third-quarter results conference. “Do not expect Dior to continue growing at a rate of 30% per annum. That will not happen. Dior has tripled in size over the last seven years. This cannot continue indefinitely. At a certain point, growth must normalize. We cannot increase by 30% per year indefinitely. The business must stabilize.”
 
During the conference, Bernard Arnault explained that growth at a maximum of 8-10% was “perfectly sufficient” and even added to “the desirability of the brand.” This change in strategy seems to prepare the ground for less lucrative years ahead. “We have extremely high growth rates, even too high. We need to slow down a bit. The problem is not growth; it is desirability,” he stated, suggesting that his flagship brands should produce less and consequently invest less in marketing. “We have reached such a stage that we no longer require such growth. We do more, but that is not the goal. I am very happy to decelerate. It is easier than pushing the cart,” he quipped.
 

To maintain this desirability, the strategy relies more on product mix than sales volume. “The philosophy remains the same and has not changed. Sell not much more, but at a higher level, and just a bit more in terms of volume. The group’s growth primarily relies on the product mix,” summarized Jean-Jacques Guiony.
 
To accompany this shift towards “normalized” sales, LVMH underwent a significant reorganization at the beginning of the year. Delphine Arnault, daughter of Bernard Arnault, was appointed CEO of Christian Dior, while Pietro Beccari, who previously held the position, assumed leadership at Louis Vuitton. Furthermore, after serving as CEO of Louis Vuitton for a decade, Michaël Burke has been appointed CEO of the LVMH Fashion Group, overseeing the company’s other fashion houses. He succeeds Sidney Toledano, who has been named as an advisor to Bernard Arnault and has left the group’s executive committee.
 
The LVMH CEO particularly praised the “extraordinary success” of Dior collections designed by Maria Grazia Chiuri for women’s ready-to-wear and haute couture, describing it as “a smaller but growing market.”

“The highest-end products are the ones in highest demand, to the extent that we struggle to keep up. Not to mention the success of the high jewelry created by Victoire de Castellane,” he continued.
 
As for Louis Vuitton, with women’s ready-to-wear led for a decade by Nicolas Ghesquière, whose contract has been renewed for five years, and with men’s fashion overseen by American pop star Pharrell Williams since February, Bernard Arnault described the brand as “a very unique business.”
 
“It’s not really a fashion business; it’s a business in which we introduced a bit of fashion in 1996, but the core is made up of high-quality products, which contribute to the success of this French brand,” he noted, highlighting the success of watches and perfumes, “which have experienced magnificent growth despite being sold exclusively through the Vuitton retail network, the only one in the world not to offer discounts.” The chief financial officer also pointed out that “when it comes to sales per square meter in Vuitton stores, we are at our maximum.”
 
Therefore, it is likely that the group’s flagship brand will continue its development through new diversifications, although nothing has been disclosed on that front yet. “The other categories we might consider will remain marginal, and it is still confidential,” hinted Bernard Arnault.