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Frédéric Arnault, the 28-year-old son of LVMH boss Bernard Arnault, is expected to leave his position as chief executive of the Swiss watchmaker TAG Heuer in the next few months, industry sources have said. The luxury family scion is to be replaced by Julien Tornare, who has been tasked with reviving TAG Heuer after having successfully revamped its sister brand Zenith over the past six years.

The move comes as TAG Heuer’s profitability and sales growth has been underperforming its peers. Also, the new line of Connected Watches may have proven popular, but they are less profitable than mechanical watches and have weighed on the brand’s overall margins, industry sources say. TAG Heuer’s best-sellers include the Carrera and Monaco models, inspired by car racing.

According to the Morgan Stanley/LuxeConsult annual ranking of the world’s top watch brands in terms of turnover, TAG Heuer slipped from 8th position in 2018 to 13th position by 2022 as other brands such as Richemont’s Vacheron Constantin and the privately owned Breitling stole market share.

“For Julien this is a major step up. He’s moving on to a much bigger scale,” a source close to LVMH told Miss Tweed. TAG Heuer is estimated to generate around €700 million in annual sales – around the same level as the brand did a decade ago - while Zenith is closer to €200 million, up from less than €100 million six years ago. “Julien will do a great job at TAG,” the source added.

Tornare is credited with making Zenith more desirable among collectors and young consumers and successfully expanding the brand’s distribution network. Before joining Zenith in 2017, he worked for 17 years at Richemont, lastly as head for Asia at Vacheron Constantin. At the helm of Zenith, Tornare is to be replaced by Benoit de Clerck, who also spent many years at Richemont. The seasoned watch executive already left his job as Officine Panerai Chief Commercial Officer a few months ago, several industry sources have said. He needs to purge his gardening leave, part of the non-competition clause in his contract that prevents him from joining a rival brand quickly. That’s why, for the moment, LVMH cannot announce Tornare’s appointment at TAG Heuer and Frédéric Arnault’s departure, several industry sources have said.

De Clerck has not replied to requests for comment about the planned management changes nor has Richemont. LVMH has declined to comment.

NEW NORMAL

Both Tornare, de Clerck and the young Arnault are embarking on new adventures at a difficult time. The luxury industry – and that includes watches – is going to through a rough patch with demand down in the United States, weakening in Europe and not as strong as expected in China. The valuation of luxury stocks has been hammered in recent weeks as investors worry about the sector’s growth prospects. Some argue the industry is going through a “new normal” of lower growth after the revenge-spending of 2021 and 2022 post-Covid.

It is not yet clear what Frédéric Arnault will do once he leaves TAG. There are several options. One is that he takes on a coordinating role at LVMH’s Watches & Jewelry division, which includes jewelers Tiffany & Co, Bulgari, Fred and Chaumet. It would be a short-term move that would keep him busy until a more attractive position comes up, sources close to LVMH have said. The second option, which is the more likely, is that Frédéric becomes deputy CEO of LVMH Fashion Group under Michael Burke, Louis Vuitton’s former boss.

Over the course of the next few weeks, Burke is expected to become CEO of Fashion Group, as Miss Tweed reported in March. Fashion Group includes Céline, Loewe, Kenzo, Givenchy and many small brands such as Pucci and Patou. Burke’s appointment has not been made official yet. The conditions and terms of his new remit are still being discussed, several sources close to the French group said. If Frédéric was to join Fashion Group, he would gain precious experience in an area of which he knows little. The three sons of Arnault’s second wife, the Canadian pianist Hélène Mercier Arnault, have experience mainly in watches and jewelry. Alexandre (31) is at Tiffany & Co, Frédéric at TAG (28) and Jean (24) works at Louis Vuitton watches. None of them has spent much time working in fashion, LVMH’s core business.

“If Frédéric wants to position himself to replace his father one day, he needs to show that he can run a fashion brand,” a senior source close to LVMH said. Bernard Arnault’s five children are in competition to succeed their father one day. Some say Jean would be the fittest, as he appears to be the most passionate and rigorous, but he may be too young when the time comes to take over. Alexandre is not yet on the top of the list, group insiders say. Hence for the moment, that leaves us with Frédéric. If he does join Fashion Group and becomes Michael Burke’s No. 2, it would be a clear sign that the young man is being groomed to play a bigger role later and his father is investing in his training. Burke is one of Arnault’s most trusted lieutenants.

KEY POSITIONS

Bernard Arnault has placed all of his five children in key positions at the group. The two from his first marriage to Anne Dewavrin have more fashion experience. Delphine, 48, became CEO of Dior this year after being No. 2 at Louis Vuitton. Antoine, 46, was promoted to CEO and vice-chairman of Christian Dior SE, the holding company that controls LVMH. Antoine is already in charge of the group’s image and communication as well as being CEO of luxury shoemaker Berluti and chairman of Loro Piana. He is largely behind the group’s efforts to become more open and transparent.

Earlier this month, Antoine was the initiator behind the family’s donation of €10 million to Les Restaurants du Coeur, an association founded by the French actor Coluche in 1985 that feeds people in need. With rampant inflation, it’s facing a surge in demand and called for sponsors to help. LVMH, one of France’s biggest employers and taxpayers, got flack for that donation from leftist politicians who see the group as a symbol of capitalist evil that just wanted to reduce its tax bill by making this gift.

Few people in the industry see either of the two oldest children wanting to become CEO of LVMH. Antoine is happy in his current role and has never expressed any desire to run the group, while his sister Delphine is not particularly fond of the limelight. While she has an eye for designers and style – she founded the LVMH Prize - she is not regarded by her peers as fully equipped to run such a huge conglomerate as LVMH.

SUCCESSION

Bernard Arnault’s children know that his successor will be nominated by a committee of wisemen, which includes Thierry Breton, who was once France Telecom boss, then French finance minister and now European Commissioner for the Internal Market.

In a recent interview with the weekly Le Figaro Magazine, Bernard Arnault said he wished to see one of his children take over from him some day but that may not necessarily happen. “Depending on the skills of the various parties involved, it may be possible — but it is neither an obligation nor a necessity — for the company's leadership to be handed over to a family member, but it is still too early to decide,” the luxury tycoon told the French weekly.

In an interview with The New York Timesthis summer, Alexandre said about his father: “There’s the risk that none of us is able to run the business as well as he has.” In any event, if Frédéric wishes to climb the ladder of responsibilities at the group, he will need to demonstrate that he knows how to manage creatives and understands the fashion market’s dynamics and product cycles. These are very different from those in watches and jewelry. Joining the group’s Fashion Group would be a good move for him.

“Right now, things are still being discussed internally. Nothing has been firmly decided yet,” a source close to LVMH told Miss Tweed about Frédéric joining the Fashion Group and Burke becoming CEO of the division. In the past few months, Burke has been taking time off to mourn the passing of his wife of five decades, Brigitte. On LVMH’s website, he is described as a strategic adviser to Arnault since February 2023 and a member of the group’s executive committee. At the annual shareholders’ meeting in April, LVMH confirmed Miss Tweed’s report announcing the departure of Sidney Toledano, 72, as CEO of Fashion Group.

Burke successfully led Louis Vuitton for more than a decade and was chairman of Tiffany & Co for two years. Known for his pragmatic no-nonsense approach, he is originally from the United States but resides in France. His friendship with Arnault goes back to the 1980s, when the two entrepreneurs made ill-fated real estate deals in Florida and Arnault returned to France to buy the Dior owner Boussac Saint-Frères. Burke helped Arnault build LVMH and has since held several senior positions within the group.

Frédéric would learn a lot working with Burke, several sources close to LVMH said. “It would make a lot of sense for Frédéric to join Fashion Group. Michael would give him space and he would be a great coach. He has already mentored several people successfully.” Burke has also coached several managers who later on became CEOs or bosses at other brands that are not part of the group.

If Burke does become CEO of Fashion Group, it is expected that he will take under his wing the Italian brands Loro Piana and Fendi. Loro Piana is enjoying strong growth, operating in the sweet spot of so-called “quiet luxury” along with archrival Hermès. Fendi is having a more difficult time as consumers have not been as enthusiastic about Kim Jones’ designs than they were about creations by the late Karl Lagerfeld, industry source said. Jones has been designing for Fendi since 2020, stepping in the big shoes of the Kaiser who passed away on Feb. 19, 2019. Burke will not be expected to micro-manage each brand in the Fashion Group and will only intervene when something needs fixing, several people close to LVMH said. Kenzo is another brand he may have to dive into as sales growth has not met expectations under Japanese designer Nigo, industry sources say. And there are a few others… To be continued…