LVMH to intensify audits and controls at suppliers, says CFO

LVMH plans to speed up its supply chain strategy and strengthen audits and controls, chief financial officer Jean-Jacques Guiony said on Tuesday, in the wake of investigations into an Italian subsidiary of the French luxury giant.

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Italian prosecutors launched an investigation into suppliers for LVMH’s second-largest fashion label, Dior, revealed by Reuters on June 11, after disclosures of alleged sweatshop-like conditions at subcontractors for the label.

“We are going to speed up a strategy that we had been implementing for quite some time now,” said Guiony, in response to an analyst question after reporting first-half earnings that slightly missed analyst expectations.
He added that while the company was unaware of alleged worker exploitation, the group accepted full responsibility for what happened.

LVMH plans to increase “vertical integration” of Dior’s supply chain, which Guiony said was at a lower level than that of its Louis Vuitton label, which is around 60%. Vertical integration refers to a strategy where a company controls multiple stages of its production process and supply chain.

He added that controls of its supply chain required further investment.