LVMH to step up audits and controls on suppliers, CFO says

LVMH plans to accelerate its supply chain strategy and strengthen audits and controls, Chief Financial Officer Jean-Jacques Guiony said on Tuesday, following investigations into an Italian subsidiary of the French luxury giant.

Italian prosecutors have launched an investigation into suppliers to LVMH's second-largest fashion brand Dior, Reuters revealed on June 11, after alleged exploitative conditions at the brand's subcontractors were revealed.

“We're going to accelerate a strategy that we've been implementing for quite some time,” Guiony said, in response to an analyst's question after reporting first-half earnings that slightly missed analysts' expectations.
He added that although the company was unaware of the alleged labour exploitation, the group accepted full responsibility for what happened.

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

He added that controls on its supply chain require further investment.