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Arnault’s leap to No. 1 shined a light on the sprawling LVMH (ticker: MC.France) empire, which encompasses some 75 “houses,” or brands, in product categories ranging from apparel and leather goods to watches and jewelry, perfumes and cosmetics, and wines and spirits. The Paris-based company also operates 5,000 stores. Among its best-known fashion and jewelry brands are Louis Vuitton, Christian Dior, Fendi, Bulgari, and Tiffany. LVMH also owns watchmaker Tag Heuer, the champagne brands Moët & Chandon and Dom Perignon, and winemaker Chateau d’Yquem.

Arnault’s fortune—recently an estimated $195 billion, according to Forbes—derives largely from his controlling stake in LVMH. The Arnault Family Group, the family’s holding company, owns about 47% of LVMH’s shares and 60% of its voting stock, primarily through its ownership of Christian Dior (CDI.France), LVMH’s largest shareholder.

What made Arnault the world’s richest man, however, isn’t merely his stock holdings—or his formidable business skills and the cachet of his brands. Credit must also go to the explosive growth in luxury-goods demand among the world’s increasingly affluent consumers, in particular the burgeoning middle and upper-middle classes in Asia and a new wave of American millionaires and billionaires.

This year, with travel and socializing curtailed by the Covid pandemic, and equity and real-estate markets on a tear, the wealthy have seen their riches pile up, and business has been tres bien. LVMH is expected to generate revenue of more than 62 billion euros ($69.5 billion) in 2021, up 38% from last year’s depressed results and 15% from 2019’s prepandemic level.

The company’s shares have also shot up, along with those of smaller luxury rivals Hermès (RMS.France), Kering (KER.France), and Richemont (CFR.Switzerland). LVMH’s Paris-listed stock has gained about 40% in the past 12 months, to a recent €712, extending in dramatic fashion a rally that began about six years ago. (The U.S.-listed shares trade under the ticker LVMUY.) LVMH sports a multiple of 34 times this year’s expected earnings of €21.08 and a market cap of about $400 billion, the largest on Europe’s Euronext exchange and more than four times that of Kering, whose top brands include Gucci, Saint Laurent, and Balenciaga.

Whether Arnault and his family remain in the topmost ranks of the world’s billionaires will depend on a number of factors, including the spread of affluence and the company’s operating strengths. Even more critical may be the outlook for consumption in China, which has been upended of late by both Covid and a government crackdown on the country’s wealthiest citizens. It is too soon to know how Beijing’s drive toward “common prosperity,” or greater economic equality, will play out, but history suggests it would be unwise to bet against LVMH and its ambitious boss.

Arnault, 72, was born into an industrial family in Roubaix, France, and educated at École Polytechnique, France’s leading engineering school. He joined the family construction company in 1971, and helped shift its focus to real-estate development. In 1984, he teamed up with financial backers to buy a troubled holding company with assets in textiles and retailing. That company, renamed Financiere Agache, owned Christian Dior, which became the springboard for the development of his luxury conglomerate.

In 1987, Louis Vuitton merged with Moët Hennessy, the champagne and cognac maker. Arnault took a stake in the combined company the following year, and in 1989 became its majority shareholder, chairman, and CEO.

In the decades since, he has fulfilled his goal of building the world’s leading luxury group through a combination of organic growth and strategic investments and acquisitions. “One of the things that makes our company extraordinary is that the boss really is long-term minded,” says an LVMH executive who requested anonymity, as he wasn’t authorized to speak. “The way that the boss thinks about brands is that they should be eternal.”

Indeed, Château d’Yquem traces its roots back to at least the 1500s.

In addition to scale, LVMH has benefited from savvy marketing, leaning in part on celebrities to keep the brands relevant and attract younger customers. Attention to recruitment and training also has helped, along with exacting management. Arnault is known to foster internal competition among his brands, lack patience with underperforming executives, and spend his Saturday mornings examining his stores and those of competitors. The company declined to make Arnault available for comment.

The arrival of Covid-19 could have been catastrophic for a company that sells designer handbags, Swiss watches, and some of the world’s most expensive bubbly. Its flagship brand, Louis Vuitton, never goes on sale.

Instead, the pandemic, which prompted business lockdowns around the world, proved a boon to LVMH and other sellers of high-end goods, from Teslas and Lamborghinis to fancy vacation homes. As spending options shrank, cash accounts grew, and the wealthy—including the newly so—splurged on luxury goods.

Global financial wealth increased by 8.3% in 2020, to a record $250 trillion, according to BCG’s Global Wealth 2021 report, published in June. “Behind the boom was a spike in net new savings and strong stock market performance, fueled by highly supportive central banks,” the report states. “Cash and deposits grew by 10.6% over the previous year’s numbers, marking the largest annual increase in 20 years.”

Credit Suisse’s global wealth report, also out in June, measures total household wealth, which it says rose 7.4%, to $418.3 trillion, last year. Citing government transfer payments and the suppression of interest rates, the report notes that “wealth creation in 2020 appears to have been completely detached from the economic woes resulting from Covid-19.”

The distribution of wealth has increasingly favored the richest households, as has been the case for several decades. The number of ultrahigh-net-worth individuals, or those with a net worth of more than $50 billion, rose 24% last year, to 215,030, the biggest increase since 2003, Credit Suisse wrote.

We’ll have to wait until next year’s reports for a full read on 2021, but studies so far point to a continuation of these trends. Using data from the Federal Reserve and International Monetary Fund calculations, two IMF economists recently charted savings and wealth in the U.S. during Covid, compared with the more “normal” period between the fourth quarters of 2014 and 2019. Among their findings: The net wealth of the top 1% of households rose by nearly 35 percentage points of the economy’s disposable income during the six quarters ended in June, and that of the next 9% by just over 30%, compared with a five-percentage-point increase for households in the bottom 50%.

The U.S. accounts for 25% of LVMH sales, below Asia ex-Japan, at 36%, but above Europe, at 21%. (The last calculation includes France, which the company breaks out separately). “Every crisis generates bubbles in wealth, and so, bizarrely, luxury is doing well in the U.S.,” says Erwan Rambourg, an analyst at HSBC . “LVMH has had a lot of first-time purchases, and a lot of recruitment in luxury. We have been writing that the U.S. was an emerging market [in luxury] for years, but that has been a lot more visible for the past 18 months.”

The LVMH executive confirms this. “In the past couple of years, during the pandemic, we observed engagement of American consumers with luxury to increase dramatically,” he says.

Greater wealth, and a greater propensity to spend it, have lifted results this year for all the big luxury-goods companies. But Arnault has seized the moment in ways that have extended LVMH’s reach and cemented its advantage. Mergers and acquisitions have been a part of the company’s DNA—and the boss’—from the start; HSBC calculates that since 1999, the company has done more deals than the rest of the industry’s players combined, and the pandemic has done nothing to stop it. If anything, LVMH accelerated its acquisition strategy, analysts note, at a time when some competitors retrenched.

In January, after a year of legal wrangling, LVMH completed the purchase of Tiffany, the iconic American jeweler, for about $16 billion, somewhat below the original offering price. Since then, the company has struck deals for at least eight more brands, buying them outright or making investments. In February, it snapped up 50% of Jay-Z’s Champagne brand, Armand de Brignac, and in April, raised its stake in Italian loafer maker Tod’s to 10% from 3.2%.

In June, LVMH took a stake in British designer Phoebe Philo’s new company. In July, it bought 60% of Off-White, the label founded by Virgil Abloh, artistic director of Louis Vuitton’s men’s business. Abloh’s death in November from a rare cancer, at 41, sent shock waves through the fashion world.

Sometimes LVMH has been both smart and lucky with its strategy. That was surely the case when the company decided, in 2017, to build a Louis Vuitton workshop in Keene, Texas, complementing two workshops in California that have produced Vuitton merchandise for the U.S. market for many years. With the newest facility, called Louis Vuitton Rochambeau Ranch, the company would be able to reach all of its U.S. stores within a day and a half, the executive said. The Texas workshop opened in 2019, with both Arnault and President Donald Trump in attendance at the ribbon-cutting.

As it turned out, LVMH hasn’t suffered many supply-chain issues in the U.S., with one exception: shopping bags, which are shipped from Asia.

A world away from Texas, in China’s rough-and-tumble market, LVMH faces perhaps its biggest challenge—and its greatest opportunity. The Chinese market for luxury goods is enormous, and growing. The latest edition of the Bain-Altagamma Luxury Goods Worldwide Market Study puts the size of that market at about $67 billion, compared with $80 billion for Europe and $100 billion in the Americas.

HSBC estimates that China contributed about 12% of LVMH’s sales in 2019, and that doesn’t include the millions of Chinese who scooped up Louis Vuitton handbags and Dior clothes on their travels abroad. Two things have happened since 2019, however, to alter the luxury landscape: The arrival of Covid has severely curtailed foreign travel, and at times restricted internal movement within China. At the same time, China’s Communist government has sought to rein in the ultrawealthy in its pursuit of greater equality.

Covid changed luxury buying habits, but possibly for the better. For one, it forced more Chinese luxury customers to shop at home, as opposed to window-shopping, or browsing on the mainland, before purchasing goods in Hong Kong, Paris, or New York.

According to the Bain-Altagamma study, Chinese shoppers accounted for an estimated 33% of global spending on personal luxury goods in 2019. That fell to 21%-23% in 2021. But shopping on the mainland nearly doubled in the same span, to an estimated 21% of the market from a previous 11%.

That benefits luxury sellers in several ways. Prices of luxury goods in China typically are more expensive than in the U.S. and Europe, due in part to import duties and shipment costs. The price gap has narrowed in recent years, but still exists; according to the HSBC “luxury pricing barometer” for September, a Louis Vuitton Speedy 30 Damier Ebene Canvas handbag cost the equivalent of $1,442 in China, versus $1,160 in the U.S.

Rambourg, the HSBC analyst, says repatriation to mainland stores began about two years before Covid, as price gaps started to narrow, trust in the local market increased, and mainland stores “became better in terms of staff, product availability, and layout.”

The geographical shift has helped boost LVMH’s profit margins. In the past, says Rambourg, mainland stores had low staff and low rents because they acted more as showrooms than points of purchase. Now, he says, “empty showrooms have become packed destinations, so leverage on staff and rent has been incredible.

“It is quite clear for me that local purchase will remain dominant, even as the world reopens, as sales associates have learned to better cater to local consumer needs,” he says.

Will these advances, and LVMH’s outlook, be clouded by China’s push for common prosperity? That’s the billion-dollar question, and the answer could help determine the company’s fortune and those of the Arnaults.

Despite China’s economic strides, inequality remains a problem. Credit Suisse notes that almost 31% of China’s wealth is concentrated among the country’s richest 1%, up from 21% in 2000. There were 1,058 billionaires living in China last year, compared to 696 in the U.S, according to the Hurun Report, a research platform that tracks wealth around the world. Yet, many Chinese live on very little.

So far, there are few clues as to how the policies of China’s president, Xi Jinping, will affect the luxury sector. And there is little evidence—yet—that they are affecting LVMH.

Says Luca Solca, a senior analyst at Bernstein, “We have yet to observe any adverse effect on Chinese luxury spend from the ‘common prosperity’ initiative. If China decides at one point that luxury consumption is no longer desirable and then pushes away from it, this can be a problem for all of the sector. We haven’t seen that, though.”

In October’s third-quarter update, Jean Jacques Guiony, LVMH’s chief financial officer, appeared to downplay the threat. “We don’t see any reason to believe this could be detrimental to the upper-middle affluent class that forms the bulk of our customer base,” he said.

It is possible, too, that China’s evolving policies might even work to LVMH’s advantage, if wealth truly is driven down from the top and spread more evenly among the middle classes.

“Everywhere in the world it is a fallacy that luxury makes all its money from the ultrawealthy,” says the LVMH executive. ‘The vast majority of luxury sales are to the aspiring consumer, the affluent, the mass affluent, the merely wealthy, as opposed to the ultrawealthy. If the Chinese program is aimed at the super-ultrawealthy, but if [wealth] spreads down and you have more affluent, from a math perspective that is going to be a good thing, not a bad thing.”

LVMH faces other potential risks. Arnault, the architect of the company’s grande strategy, is in his eighth decade, and a succession plan hasn’t been made public. That said, LVMH has a deep bench of seasoned executives, and four of Arnault’s five children hold positions with the company.

A sharp decline in the U.S. stock market would also pose a threat to the company’s prosperity, with the wealth effect running in reverse. It happened in 2008-09, during the financial crisis, although LVMH bounced back stronger than ever—and was just as acquisitive as in the past.

“We went through this in 2008-09, and by definition it will happen again,” the executive says. “One thing about being very focused is everyone pulls back, but we tend to react to the recovery more quickly. We did it in ’08 and will do it whenever the next downturn comes.”

Moreover, greater and more broadly distributed wealth in China suggests that LVMH could compensate elsewhere for a downturn in the U.S. In a recent report, McKinsey & Co. estimatedthat by 2030 China could be home to about 400 million households with upper-middle and higher incomes—roughly as many as in Europe and the U.S. combined. The firm estimates that the number of millionaires in China could double in coming years, to around 10 million in 2025.

“Thanks to their rising incomes, Chinese consumers are punching well above their weight...in several categories,” McKinsey wrote. Luxury goods and premium autos are among the largest of those categories.

In the near term, Solca thinks LVMH stock could trade up to €843. He predicts that the company could earn €14.4 billion next year, helped by expanding profit margins. “Megabrands rule,” he says. “LVMH is highly diversified and prepared to make the most of opportunities, and its high cash flow can fuel [its] M&A [merger and acquisition] ambition.”

This past week, Arnault and his family were No. 3 on the Forbes Real-Time Billionaires list, putting the man and his clan behind Elon Musk, co-founder and CEO of Tesla (TSLA), and Bezos. Third place is nothing to sneeze at, especially in this competition, but given the long-term projections for the spread of wealth, rising demand for luxury goods, and Arnault’s determination to out-mega the competition, he might well revisit No. 1.