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Louis Vuitton Leans Into the Slippery Slope of Culture as the Calls for Equity Grow

In LVMH’s recent earnings call reporting fourth quarter and year-end 2021 results, CEO Bernard Arnault took a victory lap.

He reported record-breaking financial results, with revenues reaching $73 billion on organic growth of 36% over 2020 and 14% compared to 2019 and profit from recurring operations at $19.5 billion that doubled over 2020 and rose 49% over 2019.

He also called out the stellar performance of its Fashion and Leather Goods segment. It’s the company’s largest among its five reporting segments, accounting for nearly half of company revenues, $35 billion. He announced its organic revenues rose 42% over 2019 and profits from recurring operations advanced 75% from two-years ago, reaching $14.5 billion.  

With Louis Vuitton the crown jewel in that segment, though the company doesn’t report sales by Maison, he also declared Louis Vuitton has become more than just a fashion brand, but a cultural phenomenon.

“It’s not a fashion company. It’s a culturally creative company that reaches out to a very important customer base, the most important Gen Z through to a more mature customer base,” he said. It was the only brand within its 75 Maisons that he christened with that title.

“Louis Vuitton is a company that is involved in many aspects of cultural life. That is the spirit of Louis Vuitton. It’s not just a fashion brand. It’s a cultural brand with a global audience,” he continued.

Reinforcing LVMH’s commitment to the cultural issues of the day, he also announced milestones on environmental, social and governance (ESG) issues.

“The Group and its Maisons carried out numerous actions in 2021 to promote biodiversity, protect nature and to preserve skills and craftsmanship,” he said in a statement and reinforced, “Our objective to strive for solid financial performance and our relentless quest for excellence remind us of our daily commitment to act in such a way as to make the world a better place.”

He recounted his company’s respect for its people’s dignity and individuality – 71% of its workforce is female along with 65% of managerial positions are held by women. He highlighted its support for the safety and well-being of its employees, with 86% of Maison employees allowed to work flexible hours.

And he added it’s upholding standards of excellence in craftsmanship, adding over 330 apprentices to its ranks, and has committed $46 million to more than 500 charitable organizations, a 57% increase over 2020.

Arnault capped his earnings call giving credit to the company’s “values, our creativity, constant quest for quality, the spirit of enterprise, the entrepreneurial spirit that motivates everyone.”

We’re all one big, happy family, he effectively said. “It’s one company. It’s a family operation controlled by a family [four of his five children work for the company] and employees, be they in management, right to the craftsmen in our 100 manufacturing sites in France, are part of the family.”

Yet things are brewing that might challenge the brand’s claim to cultural relevance. With Arnault called the King Midas of luxury, can his golden touch last as the culture’s values seem to shift at the speed of the internet with each passing news cycle?

Challenged cultural relevance

On Thursday, Feb. 10, hundreds of Louis Vuitton workers staged a walkout from three of its 18 factories in France, claiming they do “fantastic work for pitiful salaries,” according to reports from the Fashion Network.

A company spokesperson confirmed that the labor dispute has since been settled, but considering that Arnault is the third richest man is the world, according to Forbes, it’s hard not to see the factory workers’ point.  

Just a few days later, Reuters reported Louis Vuitton will raise prices due to rising costs, with investment firm Bernstein estimating women’s leather goods prices could rise between 7% to 20%. This could put its already pricey handbags out of reach of younger, cash-strapped customers who’ve contributed mightily to its recent growth.

And then to the claim that Louis Vuitton is now a culturally creative company, one can argue that luxury in and of itself is a cultural construct. At its core, luxury is a social signal that communicates the distance between the haves and the have-nots.

The distinction between inequality and inequity has become a fracture line in the current cultural dialogue. It could be a hard line for Louis Vuitton, or any luxury brand, to navigate as the culture’s call for equity evolves.   

Craftsmen and women demand their fair share

A small – the company reported only 240 out of 4,800 artisans were involved –  but a vocal coalition of union workers represented by the Confédération Française Démocratique du Travail (CFDT) and  Confédération Générale du Travail (CGT) walked out for two-hours during the changeover from the morning to evening shifts.

According to reports, the company has been negotiating with the unions since last fall. The company offered an average salary raise of $171 per month and to reduce work hours from 35 to 33 hours per week.

But the unions pushed back saying it was trying to eliminate the standard day shift and switch to only morning and evening shifts. This change, the unions say, would negatively impact workers’ private lives by forcing them to work late into the evenings.

The workers also challenged the company pay scale. According to The Sourcing Journal, a Louis Vuitton employee with 15 years of experience makes $16 per hour, which seems trifling considering the prices for its handbags. The company has not confirmed this statement at time of posting.

As mentioned, the workers eventually agreed to the company’s terms. The company stated, “Louis Vuitton reiterates that the well-being and fulfilment of its employees is at the heart of its social policy, and has an advantageous compensation policy that allows its atelier employees to be paid an average of 18 months’ salary per year.”

But this action, along with others, like the Canadian truckers’ convoy and the growing trend toward retail workers unionizing in the U.S., may be warning shots of growing unrest from the ranks of the working class about corporate pay scale and benefit inequities.

Since the pandemic, a new term entered our lexicon, that of “essential workers” – or “travailleurs essentiels” in French. That’s the very definition of what the Louis Vuitton artisans are. They do the essential work that keeps the company prospering and contributes to making Arnault, his family, the company senior executives and investors rich.

And it would seem the company is more than able to give its essential employees a greater share, most especially since CFO Jean-Jacques Guiony admitted in the earnings call that profit margins for Louis Vuitton have not come down in 2021, but may well have increased due to increased volumes and less depreciation on finished goods.

Already high prices are going up

During the earnings call, Arnault got philosophical about inflation and its potential impact on prices. “Everyone’s talking about inflation. Some [experts] are saying we’ll return to inflation like in the 80s. It will be difficult to stop it. It will penalize the economy,” he said.

“[Then] there are others who are equally legitimate and reputed, also some Nobel Prize winners, saying that it’s transitory and created in the global economy by the pandemic. Once all that is resolved, inflation will calm down and things will resume normally. I can’t tell you that I favor one or other explanations,” he continued.

However, Arnault expressed confidence that “things will continue to improve” and “demand will remain strong.” He also asserted, “We have an advantage over quite a few other companies and groups, which is a degree of flexibility on our prices.”

Then, as the question-and-answer period proceeded, he continued reflecting on prices, suggesting that given its customers’ expectations, the company almost has an obligation to raise prices.

He said, “The margins we’re achieving [in] pricing of our products offers very acceptable margins, but we also need to be responsible to our customers. We need to be reasonable. We try and be reasonable so that our customers do sense, do feel, that with us they are with brands that bring them something that [is] realistic.”

No sooner did that sink in than Louis Vuitton announced a price increase in all Louis Vuitton stores worldwide covering leather goods, fashion accessories and perfumes. Called a “price adjustment,” the company said the changes take into account rising production costs, raw materials, transportation and overall inflation.

It seems that Louis Vuitton is raising prices simply because it believes it can. Whether demand can remain as robust as it has been against across-the-board inflation remains to be seen. But price increases may well put the brand’s growth at risk, especially among younger consumers.

“If we had access to the data, we’d be shocked how low the average incomes of Vuitton customers are in China and the U.S.,” speculates Erwan Rambourg, author of Future Luxe: What’s Ahead for the Business of Luxury. “High-net-worth individuals are only a small fraction of sales in luxury retail. Luxury consumption is not as correlated to wealth as you would think.”

Slippery slope in connecting culturally

In the earnings call, Arnault did not explain what he meant by the brand’s evolution from a fashion to a cultural creative company, though he pointed to the Virgil Abloh Tribute Fashion Show as being “far more than a fashion show,” featuring apparel, shoes, leather goods and an orchestra led by the conductor of the Paris Opera.

At its most basic, Rambourg believes it refers to Louis Vuitton’s diversification strategy. “Fundamentally, I think it means that he doesn’t see limitations in what Louis Vuitton can sell and the messages it can put out. It’s a brand that is now relevant in jewelry, sneakers, fragrances – categories I wouldn’t have imagined ten years ago.”

Rambourg continues, “It reflects an incredible amount of trust in the brand that enables it to go a lot further in terms of product diversification. It’s basically an entire ecosystem, rather than just a manufacturer of physical goods.”

That ability to extend beyond the physical thing, be it fashion, leather goods, perfumes or footwear, into an experience is how Daniel Langer, founder of luxury consultancy Équité and executive professor of luxury strategy at Pepperdine, interprets it.

“Louis Vuitton started as a trunk maker. The company basically elevated the way we travel,” he says. “Over the history of the company, it’s been related to the idea of people going from one place to another in style. It’s a brand that connects people with different cultures beyond the narrow definition of a fashion brand.”

Langer also points to the company’s diversification strategy, like its introduction of earbuds, as reflecting a cultural experience delivered through listening to music. “Louis Vuitton is a company that crafts things of high desirability, so in creating that desirability, it is a brand that is inspired by culture.”

Yet there are cultural pitfalls. “Sometimes luxury brands don’t like to use the word ‘luxury’ because it can be connected with excess,” Langer continues. “And then there is the situation with prices. Luxury may be beautiful, but it also is expensive.”

And both Langer and Rambourg point to the tragic loss of Virgil Abloh as potentially threatening its current cultural connection with younger consumers. “Abloh brought streetwear together with high fashion luxury in a way no one else could,” Langer reflects.

“Virgil Abloh built a bridge between this aristocratic European brand to an up-and-coming consumer who is younger, more diverse and more causal in the way he or she dresses,” Rambourg says. “Abloh has been a translator, an enabler, to help the brand connect with the current cultural zeitgeist.”

Culture calling

Seemingly Louis Vuitton wants to extend the cultural conversation by presenting an LV point of view into a wide range of categories, now including chocolates and gaming. Or as Rambourg says, “Vuitton is able to put an LV on anything and make it work, like Nike with its swoosh.”

That may be true today, but what about tomorrow? Traditionally ubiquity has been the enemy of luxury brands. It’s the very definition of mass market. And maybe that’s the plan, to come alongside of Nike, not to rise above it.

But then Louis Vuitton needs to talk to the culture at large, not just the cultural elite. How authentically can it connect with the next generation of customers where equity is a value held dear while the brand’s roots are decidedly inequitable? It’s going to take a lot of creativity to find that balance.

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