TheChek News Flow

Tension is high at LVMH, with heads rolling among the higher echelons of the group. If we talk just about CEOs, this year alone the leaderships of many brands and divisions have changed.

Starting with watches, there has been a new division head and new bosses for Tag Heuer and Hublot, then in fashion, new chiefs for Fendi and Givenchy. Then there was the kerfuffle around who is CEO of the Fashion Group, the umbrella division for fashion houses other than Louis Vuitton and Dior. The Fashion Group’s CEO left in April after three months. He was replaced by the division’s former boss, but his return was never officially confirmed, probably because it was evidence of how erratic the group’s management decisions can be. More on this below.

In beauty, the CEO of Make Up For Ever, was brutally ousted at the end of June. Earlier in June, the group’s CFO and a key member of the executive committee was told he was going to be replaced by a woman from Danone. The two men who were pushed out have something in common: they expressed discontent about what was going on at the group and were shown the door, sources close to the group said. However, other sources close to the group said the CFO wanted to leave and was encouraged to do so.

Bernard Arnault, LVMH boss and one of the world’s richest and most powerful men, does not like to hear his managers point out strategic mistakes or complain openly about their superior’s abusive behaviour. Public humiliation is a national sport at LVMH and Arnault is a champion.

The recent wave of people leaving confirms that at LVMH, although officially you are encouraged to disagree with your manager or complain if something is not right, the reality is that if you do, you risk losing your job. This pattern creates a climate of fear inside the group which is bad for performance and creativity -- pillars of LVMH’s success.

The group’s culture of suppressing whistleblowing appears now in broad daylight. In June, several people were sacked from the Moët Hennessy wine and spirits division because they complained about cases of emotional blackmail and sexual harassment. One of the women involved was told by the group to take lessons in becoming “less seductive”, as La Lettre reported. LVMH’s internal auditing procedures might need beefing up.

Bernard Arnault appears to have lost touch with reality. He believes he can get away with autocratic behaviour and suppressing any form of opposition or accountability. That spirit does not send a very positive or reassuring signal to shareholders in terms of corporate culture.

Arnault’s opposition to freedom of the press, and freedom of speech more generally-- pillars of democracy -- became clear last week when a memo he sent to staff was published by La Lettre. In it, he forbade his staff from talking to journalists from seven media organizations including Miss Tweed. Since they do not rely on advertising by his brands to pay their journalists’ salaries, he cannot control them. Therefore, he regards them as a threat.

Richemont does the same. The group has not only blacklisted Miss Tweed for more than three years, it has also banned staff from posting on social media for more than a year. That edict goes against individuals’ freedom of speech: the right to express opinions and ideas without interference, retaliation or punishment by a government or any other organization or institution.

This week, more than 46 French media outlets signed an open letter in protest against the very idea of blacklisting journalists, something many luxury groups do, not only LVMH and Richemont as Miss Tweed has reported. Several news organizations owned by Arnault signed the open letter, including Les Échos and Le Parisien as well as Challenges magazine in which LVMH has a 40-percent stake.

On Wednesday, another senior LVMH executive left: Chris de Lapuente, a member of the executive committee since 2011 in charge of selective distribution. De Lapuente oversaw the duty-free business DFS, based in Hong Kong, the Paris department store Le Bon Marche and beauty retailer Sephora.

“Chris has led Sephora to become the undisputed leader of Prestige Beauty worldwide,” Arnault, LVMH’s controlling shareholder, said in an internal memo announcing his departure. “Sephora has become five times bigger since Chris took the helm.”

It is not clear why de Lapuente left. LVMH said he was retiring. However, who retires at the age of 61 at LVMH? Some execs who are still in place are well into their late 60s. Some are even older, such as the Fashion Group’s returning CEO Sidney Toledano who is 73. Arnault himself is 75 and plans to stay at the helm at least until he is 80, if not beyond. The same applies to the group’s CFO Jean-Jacques Guiony, who is 62. The dynamic finance director may have resigned but he is certainly not in a retirement mode. It is not clear what he will do next and whether he will stay with the group or not.

Industry observers will notice that many of the executives resigning from their positions are over 60. LVMH HR supremo Chantal Gaemperle is good at finding ways to make them want to retire, either thanks to big cheques or various forms of pressure from Bernard Arnault. “Gaemperle is obsessed with replacing people who are over 60 with younger managers,” one person close to the group said. “But the problem with this drive is that the group is losing a lot of experienced managers and the younger ones are not always of the same caliber.”

Several sources close to LVMH believe it’s possible that Guiony also left because he expressed his opinion too forcefully and contradicted Arnault – which is the job of a CFO. Guiony’s departure reminds us of the brutal exit of Yves Carcelle, the beloved former CEO of Louis Vuitton who died of cancer in 2014 at the age of 66. Carcelle also paid dearly for doing things his own way and ignoring Arnault’s demands, as described in the book How Luxury Conquered the World. Like Guiony, Carcelle’s replacement came from Danone.

Guiony was gently humiliated by Arnault in front of more than 300 of the group’s executives at the leaving party for Toni Belloni, the group’s former managing director, several people close to the group said. In March, Belloni was replaced by Stéphane Bianchi as LVMH’s managing director. Bianchi is also chairman of the executive committee. He will oversee the group’s selective distribution arm, previously run by de Lapuente. The fact that a replacement has not been named immediately could mean de Lapuente left because he wanted to or was encouraged to resign.

Belloni was protecting de Lapuente, sources close to the group said. They both worked for Procter & Gamble before joining LVMH. With Belloni gone, de Lapuente probably realized it was a good time to go.

The current downturn in discretionary spending is a factor in the tension at luxury groups, with people casting blame at each other for the underperformance of the brands or divisions under their responsibility. As a result, heads are likely to continue to roll in the luxury industry. Egos in the industry tend to be large, not only at LVMH. This makes it difficult to build a genuine esprit de corps and a fluid workflow which are essential for success.

Michael Burke, Louis Vuitton’s former boss who was named CEO of LVMH Fashion Group in January, left after a few weeks. He was replaced by the division’s former boss Sidney Toledano, previously CEO of Dior. On LVMH’s website, Burke, 67, is still CEO of Fashion Group and a member of the executive committee.

People close to the group said Burke left because he badly managed the hiring of Alessandro Michele for Fendi. Michele is the designer credited with driving Gucci’s revival from 2015 until the pandemic. Michele’s demands in terms of remuneration and power were too high, sources close to LVMH said. For example, he wanted the brand to sever ties with Fendi family members, including Silvia Venturini Fendi and her daughter.

The Fendi matriarch is in charge of Fendi’s menswear and accessories and worked alongside the brand’s former star designer Karl Lagerfeld for five decades. Her daughter, Delfina Delettrez Fendi, has looked after the brand’s jewelry since 2020 and presented her first high jewelry collection in July last year. The two women are respectively the third and fourth generation of the Fendi family to be involved in the brand.

Michele joined Mayhoola’s Valentino in March and showed his first collection on Sunday during Paris Fashion Week (more on his show next week). On Tuesday, Miss Tweed reported that the former Valentino designer Pierpaolo Piccioli was expected to be appointed Fendi’s new creative director. Piccioli is credited with having strengthened Valentino’s fashion authority, particularly in couture and evening wear, and growing the Italian brand into a €1.3 billion business during his 16-year tenure.

It is not yet known when Piccioli’s appointment will be announced. “I understand it’s going to be official soon,” one senior industry source said.” “Talks are very advanced,” another industry source said. LVMH declined to comment. Contracts with designers often take a long time to be negotiated and there are often last-minute changes. It’s possible that the departure of Hedi Slimane at Celine, which Miss Tweed was first to report, will be announced before, possibly as early as this week, some industry sources predict.

Fendi has been struggling to regain momentum and find its footing after its longstanding German creative director Karl Lagerfeld died in 2019. Lagerfeld, known as “the Kaiser”, had been Fendi’s creative director since 1965. He created the brand’s double FF logo and kept it vibrant and relevant for decades with provocative shows.

The Kaiser was replaced by Kim Jones in 2020, but the British designer did not succeed in giving Fendi a new credible and pertinent identity that seduced shoppers. The brand’s sales have been sagging, even before the current luxury spending downturn of the past 18 months.

Fashion critics argue that Jones simply did not understand Fendi. What he does is elegant, luxurious and timeless, but it does not have much emotion. His latest collection, shown in Milan last week, paid homage to the 1920s (Fendi was founded 1925) with some Art Deco embroideries on transparent tulle dresses. The show failed to generate much excitement among fashion followers.

The British designer is also the creative director of Dior’s menswear, a big job for which he has been getting more praise than for his work at Fendi. In May, Fendi appointed as its new CEO Pierre-Emmanuel Angeloglou, who had been promoted in March to deputy head of LVMH’s Fashion Group.

Another designer joining LVMH is Sarah Burton who abruptly resigned from Kering’s Alexander McQueen a year ago. Burton was appointed creative director of Givenchy earlier this month, working alongside Alessandro Valenti who replaced Renaud de Lesquen as CEO of the brand in July.

Will Burton turn Givenchy into a new version of Alexander McQueen where she has spent all her working life? Will Michele turn Valentino into a new version of Gucci? That’s the risk when luxury groups keep hiring the same designers whose style is more recognizeable than that of the brand itself.