| BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
LVMH's Ullman: "This Is Not Willy-Nilly Expansion" (int'l edition) The luxury-goods maker's managing director talks about the company's far-ranging retail strategy As chief executive of R.H. Macy & Co., Myron E. Ullman ran an all-American department-store chain, famous for its Thanksgiving Day parades and as the setting of the beloved Christmas film Miracle on 34th Street. But these days, Ullman is working a few doors down from the Arc de Triomphe, at the headquarters of Paris-based luxury conglomerate LVMH Moet Hennessy Louis Vuitton. Since July, 1999, Ullman has been LVMH's group managing director -- second in command to LVMH founder and Chairman Bernard Arnault. With sales approaching $9 billion this year, LVMH is already the world's No. 1 luxury-goods maker, with a portfolio of brands ranging from fashion giant Louis Vuitton to champagne maker Moet & Chandon. And it's still growing. Over the past year, it has made more than a dozen acquisitions, including Italian fashion group Emilio Pucci, while making an aggressive push into retailing with its self-service Sephora cosmetics and perfume chain. Sephora has opened more than 60 U.S. stores in the past two years and recently launched an online sales outlet, Sephora.com. Ullman, 54, brings a wealth of retailing experience to the job. He joined Macy's in 1988 as executive vice-president, becoming CEO in 1992 after the company filed for bankruptcy protection. He led Macy's through the financial restructuring and reorganization that culminated in its 1995 merger with Federated Department Stores Inc. He then became chief executive of retailer DFS Group Ltd., joining LVMH in 1997, when it acquired a controlling stake in DFS. Once principally an airport duty-free operator, DFS is now shifting its focus to larger luxury-goods shops, catering to tourists in major cities in Asia and the U.S. Ullman currently divides his time between Paris and the San Francisco Bay area, where his family lives and where LVMH's retailing operations are headquartered. Although Chairman Arnault and most other top company executives speak English, Ullman says he's working hard to learn French. In an interview with Carol Matlack of Business Week's Paris bureau, Ullman talked about LVMH's retailing ambitions. Edited excerpts from their conversation follow: Q: How does retailing fit into LVMH's overall plans? A: There are three basic thrusts in our retailing. First, travel. DFS is clearly focused on upscale merchandise, which is compatible with our core business of upscale brands, even though only 20% of the business in a DFS store is LVMH brands. With the acquisition of Miami Cruiseline Services [acquired earlier this year], we now have 75% of the retail aboard all the world's cruise ships. Our second major thrust is Sephora. We started with 57 stores in France [in 1997] and now have over 400 stores in 12 countries. We haven't found a country yet that doesn't respond very well. It is truly a great concept, and a global opportunity for us. It's something the customer loves, and the pricing is compatible with the department stores and other retailers in the market, so we're not undercutting anyone. Now, we have the dot-com business as an extension. Our third thrust is the upscale specialty store, like Bon Marche [a Paris department store that LVMH has overhauled as a luxury emporium]. We are also developing some specialty concepts in the U.S., like Solstice [a sunglasses retailer]. So retailing is not a new thrust for us, it's building on those three seeds. Q: Isn't it risky for LVMH to expand into a difficult and low-margin business like retailing? A: This is not willy-nilly expansion. It is compatible with our core business. It's one of those rare opportunities, a business we understand where we're well positioned in the market. If you look at the travel sector, we invested heavily in the Asia Pacific region even during the downturn to do the things necessary to build market position, and now that is paying off. The cruise business, we think, leverages this, and gives us access to more North American customers. Or if you look at Sephora, it's one of the great opportunities to build a global brand. But with stores like Bon Marche, we have no plans to try to replicate that [in other countries]. It's very hard to execute, to be smart locally as well as leverage something globally. Q: What profit margins are you expecting in retailing? A: We have set a target for our travel retail of 10% by 2002. Globally, we expect Sephora to be 7% to 10%. We're looking for an operating profit in the third year [after each Sephora store opens]. Q: What did you learn from your previous jobs that has been helpful to you at LVMH? A: It's all about people, making sure your people have the right tools, but mostly making sure you have the right people. These are not simple businesses to lead. You have to have talent, and you have to have the focus to stay disciplined. Understanding the markets is the second issue. You need local, on-the-ground extensive knowledge. Retail is all about details. Stuff happens, and you have to be able to respond. That's one reason I like to be in my office early, around 6 a.m. Q: Tell me about Sephora.com. A: It's growing, and we're adding brands all the time. Just a year ago, there were 18 [major Web sites selling upscale cosmetics and perfume brands]. Now, there are about five, and in a year or so there will probably be two -- and we'll be one of them. We have a big advantage in having a legitimate brand with legitimate stores. And this is a game worth winning. The products have higher margins than books or CDs. Today it's small, but traffic is building. Q: And what about eLuxury.com, the Web site LVMH launched in June to sell luxury brands from LVMH and other companies? A: It's a natural extension of our core business, which is to present boutique brands in an environment where we replicate, as best we can, the experience that people would have in a store. When you use eLuxury.com, there are e-concierges to help you, and they are trained. They have to spend a certain amount of time in our stores before they can go on the Web. We're not deviating from our strategy of high-gross-margin businesses and protected distribution, and we expect to be a leader. We haven't thrown 100 things against the wall [hoping] that several stick. We wouldn't put our brands at risk. Q: What are your overall growth projections for LVMH? A: We've already said that we are planning to double sales and profits within five years, starting in September, 1999. That means we'll need 15% growth annually. Of course a young company like Sephora is having explosive growth in sales, and other businesses, like cognac, are more mature. But we expect growth from all of our segments. The growth at Vuitton continues, and we think it will continue to grow in double digits. We also see great opportunities in [fashion houses] Celine and Fendi. We think the champagne business will return to strong growth, and we are looking for growth from the emerging cosmetic and fragrance brands and the watch business. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Identity Crisis at LVMH? (int'l edition) TABLE: The Quest for Retail Customers ONLINE ORIGINAL: LVMH's Ullman: "This Is Not Willy-Nilly Expansion" (int'l edition) INTERACT E-Mail to Business Week Online | |||
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