By
Bloomberg
Published
Jul 17, 2024
As demand for luxury goods and beauty products declines in some regions, so have the fortunes of a clutch of the world’s richest people.
The drop has toppled Bernard Arnault, 75, founder of handbags-to-Champagne conglomerate LVMH, from his No. 1 perch on the Bloomberg Billionaires Index. And in a further sign of more frugal times, the heiress of cosmetics giant L’Oreal SA, Francoise Bettencourt Meyers, briefly lost her crown earlier this month as the world’s wealthiest woman to Alice Walton, a member of the founding family of US retailer Walmart Inc.
The extent of the market downturn became glaringly apparent this week as the earnings season kicked off with an unfolding crisis at UK luxury trench-coat maker Burberry Group Plc and plunging sales at Swatch Group AG. L’Oreal, LVMH and other industry heavyweights backed by billionaires are scheduled to report later this month.
Overall, the fortunes of a half-dozen ultra-rich who derive their wealth from pricey products made for pampering have dropped by 4% this year, or about $17 billion though Monday’s close, according to the index. That compares with a rise of 13%, or $1.0 trillion, for the rest of the 500-person ranking. The last time the gap between the two groups was this large was in May 2022.
The decrease masks disparities that have emerged across the sector depending on factors such as brand popularity and exclusivity. The losers are Bettencourt Meyers, Arnault and his longstanding rival Francois Pinault, 87, who founded Gucci-owner Kering SA. The French companies the trio control have also been hit by investor wariness of their home country after President Emmanuel Macron called a snap election that has resulted in a hung parliament and no government.
Downbeat outlook
Arnault’s wealth has fallen by $7.4 billion over the past year to $200.1 billion and now trails the fortunes of Tesla Inc.’s Elon Musk and Amazon.com Inc.’s Jeff Bezos. LVMH, the firm he built over more than three decades into a 75-brand juggernaut including couture house Christian Dior, jeweler Tiffany & Co. and Hennessy Cognac, reported markedly slower sales growth for fashion and leather goods in the first quarter and an overall decline in Asia, excluding Japan.
L’Oreal’s downbeat outlook for China has weighed on the wealth of Bettencourt Meyers, 71, who in December became the first woman with $100 billion only to see her fortune drop to around $91 billion. With high-end brands like Aesop, Lancome and Yves Saint Laurent as well as the more affordable L’Oreal Paris, Garnier and Maybelline, the company in which she and her family have an almost 35% stake is trying to navigate the slowdown across regions and price points.
The drop in Pinault’s fortune has been the most remarkable, halving over the last three years to $28 billion as problems in his empire run deeper than the slowdown in China and French political uncertainty. Kering, which is headed by his son Francois-Henri Pinault, warned in April that profit will plunge in the first half of the year as the firm tries to turn around its biggest brand, Gucci, which is struggling.
At the same time, there are luxury billionaires who have managed to grow their fortunes during the period, including the Wertheimer brothers behind Chanel, widely viewed as one of the most exclusive luxury brands. The closely held company reported double-digit growth last year, although it cautioned that the market had grown more challenging and demand for its handbags and tweed suits had slowed in the Americas.
South African billionaire Johann Rupert, 74, who controls Cartier owner Richemont, has also emerged as a gainer. Richemont’s resilience was on display Tuesday when the company reported rising sales from jewelry brands that also include Van Cleef & Arpels and Buccellati, offsetting an overall 27% plunge in revenue from the greater China region.
Investor relief pushed the shares slightly higher, but this didn’t extend to LVMH, L’Oreal or Kering, which ended Tuesday down in Paris trading. The industry was spooked on Monday by Burberry’s profit warning and plan to replace its chief executive officer. Swatch Group AG also reported a plunge in sales and profit amid a China-led slowdown for Swiss watchmakers and other luxury companies.
