France, which is home to some of the most esteemed and valuable names in fashion, has rolled out a number of initiatives aimed at safeguarding the health of native companies and protecting its citizens from sweeping unemployment in light of the rising impact of the COVID-19 virus. One such effort? A $50.16 billion “expanded partial-unemployment package in which the [French government will] pay the salaries of employees who are needed during the crisis” in order to avoid layoffs, according to the Wall Street Journal.
In other words, the $50 billion plan enables companies to reduce employees’ hours or to furlough them (i.e., temporarily cut their hours (in part or entirely) while technically still keeping them in their positions as employees), while leaning on the government to pay at least a portion of their salaries. According to a report from the Financial Times on Monday, it appeared – at least initially – that some of the country’s biggest fashion groups wanted in.
“Internal emails and documents reviewed by the Financial Times show that soon after France entered lockdown on March 15, LVMH Moët Hennessy Louis Vuitton” – a publicly-traded luxury goods giants with a $173.32 market cap and annual revenues of $59.1 billion in 2019 – “had started to put some workers on the government’s so-called ‘partial activity’ scheme across its various businesses,” the publication reported. “Workers at Louis Vuitton, and beauty retailer Sephora were among those told in March they would be put on the government program — only to have the decision reversed last week” by the Bernard Arnault-chaired LVMH.
“Similar events took place at Kering,” the Paris-based parent company of Gucci, Yves Saint Laurent, Balenciaga, and Bottega Veneta, among other brands, according to the FT.
Why the change of heart by the luxury leaders? It seems to have something to do with the fact that the two giants “smaller rivals Hermès and Chanel” subsequently announced that they would “cope without state support in a spirit of ‘national solidarity.’” Both Chanel and Hermès recently revealed that they would not rely on France’s government assistance plan to keep their employees’ salaries in check. Chanel announced last week that it would not be putting any of its 8,500 employees in France into temporary unemployment.
“Our aim is not to weigh on the public accounts so the French state can prioritize help to the most vulnerable companies, and focus its resources on the health system and its doctors and nurses,” Chanel said in a statement.
Around the same time, Hermès vowed to maintain the basic salary for its 15,500 employees worldwide without the aid of government funding. The 183-year old brand also stated that it would keep dividends at the same level as last year, while its executive chairmen “wished to waive increases in their fixed remuneration paid in 2020 and in their variable remuneration allocated in 2020 … and will therefore, receive in 2020 a total amount of remuneration identical to that received in 2019. ”
More than merely wanting to avoid the harsh criticism that would likely come with industry giants tapping into “programs [that] are supposed to help fragile companies and workers who really need it,” the FT asserts that the question of whether or not to accept financial aid from the government “has turned into a fraught question for some of France’s biggest companies because asking for help risks turning once internal matters, such as executive pay or dividends, into matters of public debate.”