At Louis Vuitton, the most pressing task now is the appointment of a new menswear creative director to succeed the late Virgil Abloh. Hospitality is another opportunity, following the US$2.6 billion ($3.7 billion) acquisition of Belmond four years ago. The company plans to open the first Louis Vuitton hotel in Paris.
Maintaining a listing brings discipline and access to capital markets. LVMH is expected to have net cash next year, according to the Bloomberg consensus of analyst estimates. But the ability to attract shareholders would be useful if a large acquisition like Chanel, which could be worth around 150 billion euros, becomes available.
But there are risks facing LVMH.
The first is succession. That’s a long shot at the moment, given that LVMH lifted the age limit on its chief executive last year, allowing Arnault, who is 73, to stay at the helm until he’s 80. However, in the end, they will have to decide whether to name one of their children in the lead role or divide the responsibilities among the five children.
If Arnault were to choose one of the younger sons, Alexandre, 30, who holds a senior role at Tiffany, or Frederic, 28, who heads Swiss watchmaker Tag Heuer, he could emulate Prada and name a non-family member as interim CEO until they are ready to download. LVMH also has a cadre of top executives, such as Burke, Beccari (if he does well at Louis Vuitton) and group CEO Antonio Belloni, who would be a safe pair of hands.
Whichever structure you choose, the process must be handled carefully: dividing the CEO’s responsibilities opens up the possibility of sibling conflict.
With LVMH increasingly in a league of its own, another danger is complacency. The background also looks more challenging. Investors are betting on a rebound in revenge spending by Chinese consumers now that they can travel, but the next few months will be volatile. Meanwhile, the US luxury market is slowing.
And LVMH is still in the fashion business. Not only is it a notoriously fickle industry, but the desire to always be on top can create slip-ups that alienate customers.
Such dangers seem remote, but the board of directors, which includes some French corporate heavyweights, must be careful to spot problems and raise them with the family. Strengthening corporate governance with more non-family members wouldn’t hurt either. Three years ago, Kering SA appointed former Credit Suisse group chief executive Tidjane Thiam and actress Emma Watson to its board, although there are questions as to how much benefit this has brought as the owner of Gucci and Balenciaga has hit a rough patch.
LVMH shareholders have enjoyed a remarkable ride so far. But as the luxury landscape darkens, they should be more than passive travelers — and put their Louis Vuitton monogrammed luggage to work.