Deluxe: How Luxury Lost Its Luster by Dana Thomas Read Free Book Online Page A

so while maintaining the brands’ integrity. Racamier made one wrong move: he turned to someone outside the family for help, someone who had no emotional attachment to Vuitton or the other brands in the group, someone who had a fearless ambition and absolutely nothing to lose. It was a move that would change the course of luxury forever.



CHAPTER TWO
GROUP MENTALITY
    “War destroys man, but luxury destroys mankind; at once corrupts the body and the mind.”
    — JOHN CROWNE , SEVENTEENTH-CENTURY ENGLISH PLAYWRIGHT
    E ARLY ON A COLD February morning in 1999 , I met with Bernard Arnault, chairman of LVMH, at the group’s headquarters in Paris to interview him for an article I was writing for Newsweek magazine. In ten years, Arnault had turned LVMH into a luxury monolith with dozens of brands earning millions of dollars. Arnault was in the midst of an attempted hostile takeover of Gucci, the publicly traded Florentine leather goods house that had, under the guidance of CEO Domenico De Sole and designer Tom Ford, in five years rebounded from near bankruptcy to become one of the most successful luxury brands ever. Arnault wanted Gucci in the LVMH group, and he invited me to his office that morning to explain why.
    He walked in quietly. Though tall, he stoops slightly, as if embarrassed by his stature. He was nattily attired in a tailored gray suit, which set off his ice blue eyes, and his long, thin hands moved with grace, conveying his love of piano. Since his English is halting, we spoke in French, he in a hushed tone. His voice was surprisingly nasal and solidly tenor, with an appealing lilt that makes it dangerously reassuring. His manner reminded me of the old Teddy Roosevelt adage: speak softy and carry a big stick. Except Bernard Arnault carries a club, and during the last decade he had used it to beat luxury’s players into submission. Luxury was his game now, and he had written a new set of rules.
    With Arnault’s guiding hand, luxury had gone corporate. Most of its major brands were now part of groups run primarily by executives who had little or no background in luxury but knew plenty about business. These executives included Johann Rupert, chairman of Richemont, which owned Cartier, Chloé, and Dunhill; Patrizio Bertelli, husband of Miuccia Prada and chairman of Prada, who had purchased a sizable chunk of Gucci stock; Jean-Louis Dumas, the chairman of Hermès, which controlled John Lobb shoes and Puiforcat silversmiths, and, as a descendent of the founder, one of the few luxury heads who had been raised, as the French say, with the culture of luxury; and Domenico De Sole, the Harvard-educated lawyer who had guided Gucci to its success and was positioning it for a much bigger future.
    Arnault and I sat down at his conference table and got down to business. Why, I asked, was he trying to take over Gucci?
    “Because, first of all, the company is doing well, and the shares were undervalued,” he told me. “Gucci is a brand with a lot of potential, in development and in amelioration of its business activities, and it has a good team. For us, it is evidently complementary: it’s an Italian brand in a portfolio that is primarily French, and it’s one of the best businesses in the world.”
    And what, I continued, was his plan for Gucci if he succeeded?
    “We want to bring ideas to improve profitability,” Arnault explained frankly. “The profitability of Gucci is half that of Vuitton. So there is still room for improvement.”
    If there is one thing that has changed in luxury in the last thirty years, it is the single-minded focus on profitability. In the old days, when luxury brands were privately held companies, owners cared about making a profit but the primary objective in-house was to produce the finest products possible. Since the tycoons have taken over, however, that objective has been replaced by a phenomenon I call the cult of luxury. Today, luxury brand items are collected like baseball cards,