LVMH has tapped into its strongest competitor's executive team and snatched a key member in hopes of reversing its plummeting sales amid a struggling luxury market. The French luxury fashion house LVMH is one of the strongest competitors of the Italy-based Prada Group. Both companies own some of the most renowned high-end fashion brands worldwide and have a similar, yet exclusive, target audience.Related: Billionaire beauty CEO turns to AI for next big winOn Tuesday, LVMH (LVMHF) announced that Christian Dior Couture (CHDRF) named Benedetta Petruzzo, former CEO of Miu Miu, as its new managing director. Starting October 15, Petruzzo will replace Charles Delapalme as managing director and oversee Dior's operations in supply chain and products.This new team member appointment comes during a time of declining global luxury sales and only months after the release of Dior's outrageous scandal. At Tuesday's market close, Dior's stock declined by 0.32% in Paris, and LVMH's decreased by 0.54% stateside. The Prada Group (PRDSF) , Miu Miu's fashion house, is also seeing red numbers with an even steeper stock decline of 5.82% at Tuesday's market open.
Rue Saint-Honore in central Paris, France, on Tuesday, April 11, 2023. Photographer: Cyril Marcilhacy/Bloomberg via Getty ImagesBloomberg/Getty Images
The Dior bag scandalDior is known as one of the most popular luxury fashion brands worldwide, with prices only an exclusive target audience can afford. However, after decades of claiming to be an Italian-made product with exceptional craftsmanship, Dior became involved in a scandal that forever stained the brand's impeccable reputation.Related: Estée Lauder's struggling CEO makes a major announcementIn July of this year, an investigation into Dior's supply chain uncovered that the bags were manufactured in Chinese-run sweatshop-like factories in Italy that engaged in unethical labor practices and conditions. In addition to the terrible working environment and low pay, it was revealed that one of Dior's designer bags, which is priced at nearly $3,000, only cost approximately $58 to assemble, plus $165.5 for leather and hardware, totaling around $223.5 per bag. The unethical discovery and the label's outrageous price spikes only amounted to its already crumbling finances.According to LVMH's first-half financial report for 2024, revenue decreased by 1%, and its fashion and leather goods sector declined by 2% compared to last fiscal year.The creation of Miu Miu and its popularityMiuccia Prada, owner of the Prada fashion label, created Miu Miu as an extension of Prada to be a more affordable, youthful, and playful women's wear line. Despite the Prada Group's declining stock and the struggling luxury market, the fashion house reported outstanding results for the first half of 2024, with Miu Miu excelling in sales. According to the Prada Group's first-half financial report, revenue was up 17% YoY.As the group's strongest brand, Miu Miu generated a 93% growth in retail sales YoY. More Retail:Nordstrom reveals secret weapon against declining luxuryNational mall-based chain closing 150 more storesLululemon sees its 'it-girl' title slip through the cracksAlthough other luxury fashion houses are barely keeping their heads above water, the Prada Group seems to be the exception. However, losing their key team member might signal an end to that run of success. Petruzzo has been a member of the Miu Miu team since 2020 and was promoted to CEO in March 2023; since then, she has helped Miu Miu rise to popularity and defy the luxury downfall. Related: Veteran fund manager sees world of pain coming for stocks
