LVMH Using Berluti Brand as a Steppingstone in Menswear; Bernard Arnault’s Son Antoine Focuses on High-End Men’s Lines

LVMH Using Berluti Brand as a Steppingstone in Menswear

Bernard Arnault’s Son Antoine Focuses on High-End Men’s Lines

CHRISTINA PASSARIELLO

Jan. 29, 2014 1:45 p.m. ET

PARIS— Bernard Arnault built LVMH Moët Hennessy Louis Vuitton SA MC.FR -1.54% into a luxury-goods empire by selling handbags and dresses to women. Now his son Antoine is targeting an underserved clientele: men, whose spending is increasing faster than that of women.

Antoine Arnault is spending upward of €100 million ($137 million) to develop Berluti, a small maker of expensive men’s shoes, into a full apparel and accessories house. The latest step in his project is the opening next week of Berluti’s first New York store, on Madison Avenue. He is also in charge of LVMH’s recent €2 billion acquisition of Loro Piana, the exclusive cashmere brand that gets half of its sales from men.

“The group has several brands with men’s lines and we saw they were having consistently strong growth, and that very high-end products were more and more successful,” said the 36-year-old Mr. Arnault in an interview at Berluti’s new Paris boutique. “It became evident to us that the group should invest more in this segment.”

Male consumers could help pull LVMH out of a growth slump, brought on by consumer fatigue of its juggernaut, Louis Vuitton, as well as the tapering of spending in China.

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Analysts forecast that LVMH, the world’s biggest luxury-goods group and a bellwether for the industry, will post a 4.4% increase in full-year sales to €29.34 billion on Thursday, a sharp slowdown from previous years.

The pursuit of men reveals the luxury-goods industry’s need to attract new consumers to offset slowing growth. In considering products from shoes to shampoo, men are more loyal to labels than women and less concerned with trends and overt logos, experts say. As a result, the luxury-goods industry is emphasizing heritage and quality over newness.

To catch more of the men’s market, Gucci parent company Kering SA KER.FR -1.64% bought Italian suitmaker Brioni two years ago. Last year, Chinese conglomerate Fosun International Ltd.0656.HK -1.18% took a stake in Italy’s Caruso, a suit manufacturer for many top designer lines which has also launched its own collection.

Many luxury-goods heavyweights, recognizing that men expect a different shopping experience, opened men’s-only stores, such as Prada, Gucci and Vuitton.

The economic crisis five years ago began narrowing the consumer gender gap. Designer fashion has long been about women: creating the latest “it bag,” whetting appetites with a constant stream of new collections.

But since 2009, women have cut back on spending by trading down to less expensive brands, mixing Zara and H&M with Louis Vuitton and Chanel.

Men, on the other hand, put off buying new suits, but returned to their high-end brands once the economy recovered. If anything, their taste became more expensive. Between 2009 and 2013, men’s luxury spending increased 55%, compared with 37% for women, according to consultancy Bain & Co.

“This is a mega trend,” said Bain luxury-goods partner Claudia D’Arpizio. “All men’s categories are outpacing women’s.”

The boom in men’s fashion sales has its roots in China, the biggest growth driver in luxury. When luxury brands opened in China, men held the purse strings and wanted to show their rising social status in their clothes. They spent heavily on casual wear for work, dismissing suits as too close to a uniform.

It was in China that Mr. Arnault began observing the booming expenditures by men. While traveling as a Vuitton executive, Mr. Arnault would spend an hour in its stores and at the competition. The crowds were bigger than usual, he noted.

“Men’s spending behavior was beginning to evolve,” said Mr. Arnault, dressed in a slim navy blue suit over a turtleneck sweater. “He was spending more time in boutiques, and was more and more aware of new collections, new materials, and technical innovations.”

The change went beyond fashion. “There’s an awareness of his masculinity: He wants to be well-dressed, good-looking and groomed,” he added. “A man doesn’t feel embarrassed by reading a men’s magazine about fashion.”

He decided to pitch a project focusing on men’s luxury. Berluti was a small men’s shoe brand that LVMH acquired in 1993 after Bernard Arnault discovered it as a client. His son saw the potential to stretch it from its roots making colorful loafers priced in the thousands of euros to making classic suits and casual wear with modern cuts.

The younger Mr. Arnault took over as CEO of Berluti three years ago to develop a clothing line and open stores. “It was a significant move for the group,” said Mr. Arnault. “The investment is big enough that I don’t think they saw this as just a trial run.”

Mr. Arnault said that Berluti should reach break-even in two years. LVMH doesn’t break out sales and profit by brand.

He hired his designer, Alessandro Sartori, from Italian menswear giant Zegna. Last year, Mr. Arnault bought a small but renowned Parisian tailor to give Berluti credibility in made-to-measure suits.

In addition to the New York shop, Mr. Arnault has opened stores from Costa Mesa, Calif., to Dubai. He keeps an eye on big-ticket purchases, such as the €43,000 crocodile suitcase sold in the Hong Kong store this week.

But he said he still learns the most from observing customers in the store.

“Look at that man trying on a shoe,” he said of a businessman glancing at his reflection in the mirror. “He’s taking out his smartphone—that’s a good sign because he’s taking a picture. Watching him browse will tell me much more than the spreadsheets I receive on my desk on Monday morning saying that we sold however many wallets.”

 

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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