BILLIONAIRE SUCCESS STORY: Bernard Arnault - Louis Vuitton

Born: March 5, 1949
Age: 59
Country Of Citizenship: France
Residence: Paris , France, Europe & Russia
Occupation: Chairman, LVMH;
Chairman, Christian Dior SA
Net worth: $26 billion US dollar
Fortune: Inherited and growing
Source: LVMH
Industry: Diversified
Marital Status: Married, 5 children
Education: Ecole Polytechnique de Paris, Bachelor of Arts / Science
Website: LVMH.com
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Bernard Arnault was born in 5th March 1949. He is the 7th richest person in the world and France's richest person with an estimated net worth of $26 billion US dollars, according to a Forbes report in March 2007.

Arnault is best known for turning LVMH, already a luxury-goods giant when he won control in 1989, into a global empire through acquisitions, savvy marketing, and bold design.

Bernard Arnault is a native of Roubaix, and graduated with an engineering degree from the École Polytechnique in 1971. In 2007, Arnault was listed among Time Magazine's 100 Most Influential People in The World. He also Said to be a skilled pianist.

At 35, using a combination of family money and loans, he bought Boussac, a bankrupt French textile group that had financed Christian Dior's original fashion house in 1946. Arnault stripped Boussac down to Dior and used it as a vehicle to create LVMH, which was born out of the 1987 merger between Louis Vuitton and Moet Hennessy. Once in control, Arnault fired executives of both companies, put in his own team, then spent the '90s snatching up still more luxury brands, including shirtmaker Thomas Pink, Chaumet jewelry, Fendi leather goods, the Pucci and Donna Karan fashion lines, Krug champagne, and TAG Heuer watches. With his father, Jean, he still controls 47% of LVMH's stock and 63% of its voting rights, while separately owning 68% of Christian Dior Couture, the fashion side of Dior.

Louis Vuitton was created in 1854 by a Paris craftsman who developed the first flat trunks covered by waterproof canvas. Later, in 1896, he invented the famous LV logo by printing his initials on the canvas. His business flourished with the growth of travel by rail and ship. By the late 1980s, though, Louis Vuitton had become the bag your mother bought. Expensive and well made, but boring.

That began to change in 1990 when Arnault brought in Yves Carcelle to run Louis Vuitton. Then, in 1997, Arnault hired Marc Jacobs, a young, hip designer from New York, as creative director. Jacobs studied Vuitton's history and developed a series of modern twists on it. The first was the graffiti bag, which bore a scrawled Louis Vuitton signature. The second was the Murakami bag, designed in collaboration with Japanese artist Takashi Murakami, who rendered the famous LV initials in a kaleidoscope of colors on a white background. "Marc brought that zest of modernity to the products," says Arnault. But he kept the brand's intense focus on quality. At the rear of Vuitton's factory in Ducey, France, sits a shredding machine for destroying bags that aren't up to snuff. Inspectors tally the number of stitches on a handbag strap. If it is off by even one stitch, into the shredder it goes. "The Japanese count the stitches," says factory director Stephen Fallon. "If they count four on one side and five on the other, they bring the bag back."

As the bags got edgier, Carcelle worked to create crucial buzz via a combination of PR stunts, celebrity endorsements, and, most effectively, artificial scarcity. They spend $1.5 million erecting scaffolding in the shape of two giant Vuitton suitcases around the renovation of Louis Vuitton's Paris store.

Since 2000, Arnault and his management team have sold a bunch of them rather than try. Gone are Bliss spa and cosmetics, Michael Kors fashion, Ebel watches, Pommery champagne, the Tajan auction house, and Hine cognac. (LVMH may sell another half-dozen brands, but executives won't name them.) Instead, Arnault has been focusing on his most promising underperformers, which include women's wear line Celine, Zenith watches, Pucci fashion, and Ruinart champagne. And he's had some notable successes so far.

Perhaps the best example is Celine. Four years ago, Celine's sales were falling, and losses stood at $16 million. So Arnault named Jean-Marc Loubier, the No. 2 at Louis Vuitton, to head Celine. Loubier mined the brand's past, as Jacobs had done at Vuitton. He discovered that it had begun as a high-class shoe merchant in 1945 in Paris. "I thought we could use this date as an asset, allowing us to present Celine as one of the first modern luxury brands, a symbol of Paris and Europe's revival," Loubier says. So, with designer Michael Kors--like Jacobs a talented American--he remade Celine into the image of the street-smart, cosmopolitan Parisian woman. The offerings--including such things as ladylike scarlet-boucle sheath dresses, double-faced camel's-hair pencil skirts, and mink scarves--appealed to shoppers from Chicago to Tokyo.

Loubier also changed the product mix. The Celine he inherited had produced mostly clothing and just a few bags. But he knew that bags were the big profitmakers at Louis Vuitton. So Kors went to work creating more bags, such as the Boogie, a classic square-shaped bag with double-rolled leather handles, available in five colors and exotic skins such as crocodile. The bag was an instant hit: Madonna, Gwyneth Paltrow, and Sarah Jessica Parker all wound up carrying it. (Celine sent some celebrities the bags for free, but didn't pay any to carry them.) Loubier took another cue from Vuitton by pricing the initial bags at a steep $1,150 for the calfskin model. Celine later came out with $580 versions in denim, a carefully calculated move: Shoppers who had seen the $1,150 model thought they seemed like a deal.

Meanwhile, Loubier improved product quality and shortened delivery times from months to weeks--making both merchants and customers happy. The result of all those changes: Celine's sales last year were up 40% from 2000, to $203 million, and profits rolled in for the first time in ten years. This year profits will be ten times what they were in 2003, predicts Loubier. Celine's fall 2004 line, arriving at stores now, looks strong. But there is a question mark ahead: That season was the last for Kors, who departed this past spring to focus on his eponymous line. Arnault selected Roberto Menichetti, formerly at Burberry, to replace him--but it's too soon to tell what he may do.

At Zenith watches, Arnault did another talent transplant. In 2001 he brought over Thierry Nataf, who once managed Veuve Clicquot, one of LVMH's most successful champagne brands. There Nataf has redesigned the watches, exposing the mechanism and using hand-stitched bands to highlight the brand's history of quality Swiss movements. This company had 120 years of great glory and then was forgotten in the last 30 years. It is really a diamond in the rough. For the first time in 30 years, the brand also is selling women's watches in pink, lime green, baby blue, bright red, and pearl gray, as well as black. And there's now a logo, just like at Louis Vuitton: a star on the crown of the watch. Zenith sales were growing by single digits when Nataf arrived; now they're growing by double digits.

Pucci, too, has benefited from the Vuitton treatment. The Italian clothing line known for its vibrant '60s mod prints was going nowhere until Arnault asked Christian Lacroix to redesign it in early 2002. Lacroix extended Pucci's iconic prints to everything from shoes to rugs and furniture. In a particularly Vuittonesque example of synergy, Lacroix has designed a Pucci box for a limited edition of $200-a-bottle, 1996 Veuve Clicquot champagne. Pucci celebrated it at celebrity-studded parties from Florence to L.A. And like Louis Vuitton, Pucci opened a flagship store on Manhattan's Fifth Avenue, the mecca of luxury shopping. Sales have more than doubled since 2002.

Even in champagne, the formula seems to work. At Ruinart, an exclusive champagne priced just below Dom Perignon, Arnault is constructing a history-rich story to sell, as he did for Louis Vuitton. To do that, he hired historians to ferret out small facts about the brand's background. They found that Ruinart was developed in 1729, drunk by Marie Antoinette, and exported to other European royalty. Ruinart's identity was elitist, aristocratic, global. So, borrowing a buzz technique from Vuitton, in spring 2004 LVMH embarked on a series of promotions, such as $220 champagne dinners at the Ritz Hotel in London, to position Ruinart that way. It's too soon to see how well the new positioning worked.

Arnault is still struggling with certain labels. Four months after that London meeting, for example, he still hasn't found a new women's wear designer for Givenchy. Donna Karan, Loewe, and Kenzo are works in progress. But with fat profits rolling in from Louis Vuitton, Hennessy, and Dom Perignon, Arnault has the luxury of time.

Arnault also set up an investment fund with his good friend Albert Frere in 2006; pair own two wineries together. LVMH recently hired Frank Gehry to design a $127 million private museum in Paris. In December opened his four-star hotel Le Cheval Blanc in ski resort Courcheval, France, where he often spends New Year's Eve.

In January 2007 Kathryn Blair, the daughter of British Prime Minister Tony Blair, completed an intensive French language and culture course at France's Sorbonne University. Tony Blair has been criticised for accepting an invitation on her behalf from Bernard Arnault. During Kathryn Blair's course, which ran from 12 October 2006 to 26 January 2007, she is thought to have been provided with an accommodation, security and transport package worth around £80,000.

As of March 2007, Arnault owns a 47.5% plurality of LVMH (Moët Hennessy Louis Vuitton), along with Christian Dior SA. Arnault is the Chairman and CEO of both companies. Son Antoine, 27, joined sister Delphine, 31, on LVMH's board in 2006.

Arnault's main competitors are: French businessman François-Henri Pinault, whose holding company PPR owns Gucci, Yves Saint Laurent, Alexander McQueen, Stella McCartney, Sergio Rossi, Bottega Veneta, Boucheron, Roger & Gallet, Bédat & Co and Christie's.Swiss-based Richemont, which owns Cartier, Van Cleef & Arpels, Piaget, Baume et Mercier, IWC, Jaeger LeCoultre, A. Lange & Söhne, Officine Panerai, Vacheron Constantin, Dunhill, Lancel, Montblanc, Montegrappa, Old England, Purdey, Chloé, and Shanghai Tang.

Arnault's influence reaches far beyond couture and champagne. He's a close friend of French President Nicolas Sarkozy; a newspaper baron who's currently selling one business daily, La Tribune, and acquiring its rival, Les Echos; and a powerful arts patron: Arnault got the go-ahead last fall to build a center for LVMH's art foundation in the Bois de Boulogne.

The formula, devised by Arnault, goes something like this: Sharply define the brand identity--or "DNA," as he puts it--by mining the brand's history and finding the right designer to express it; tightly control quality and distribution; and create masterful marketing buzz.