This week, LVMH announced important management changes: Michael Burke who has been running Louis Vuitton for 10 years, training Bernard Arnault’s daughter, Delphine, has been replaced by Pietro Beccari who is himself, replaced as Dior CEO by Delphine Arnault. This raises several interesting points for family businesses in the luxury sector.

1-Sucession plan are based on long-term strategies 

especially when family members are involved in the business. It requires both flexibility and meritocracy. Hermes often cited as a good example of family management transition allowed a nonfamily member, Patrick Thomas, to run temporarily Hermes from 2003 to 2014. One of Patrick Thomas duties was to identify within the Hermes families who could get important responsibilities step by step and to select Alexandre Dumas (one of Hermes families) as a potential front runner and to train him for the top job.

2-Family members must demonstrate to all shareholders their ability to run the business. Alexandre Dumas current CEO of Hermes had to go through a hurdle race before taking important responsibilities within Hermes. Bernard Arnault is following the same path: Delphine Arnault had to learn under Burke leadership the tough business of growing a Louis Vuitton key brand for the past ten years. She is now given full responsibility of Dior, the second most important business of LVMH. And Bernard Arnault is keeping also other options opened by appointing his youngest son Frederic, who like him, graduated from Polytechnique, as CEO of TAG Heuer: “Hard luxury” (jewelry and watches) is becoming  an important part of the equity story of LVMH.

3-These careful and long-term strategies contrast with Swiss luxury groups succession plans…. 

When the fund Bluebell tried to appoint a director at Richemont, back in 2022, one of its critics was the lack of succession plan. Johann Rupert current CEO of Richemont and controlling shareholder, is now 72 years old, he has changed succession plans many times exhausting high quality candidates like Eric Vallat who decided to return to Remy Cointreau rather than waiting for byzantine secessions plans within Richemont. Johann Rupert ‘son, Anton, despite being a Richemont director is not regarded as a credible successor. And Swatch CEO succession plan is a just a taboo topic….

Conclusion

When luxury family businesses become complacent on succession plan, shares underperform (gap of performance between Hermes and Swatch share price of 600% over 10 years) raising tensions within the board and the family and opening the door to take overs: Louis Vuitton in 1990, Bulgari in 2011. Even in the luxury sector, families must “mind the gap”. As a famous watch advertising quote says “You never actually own a Patek Philippe, you simply look after it for the next generation”