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CNBC Transcript: LVMH Chairman & CEO Bernard Arnault Speaks with CNBC's "Squawk on the Street" Today

WHEN: Today, Tuesday, May 6th

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a CNBC interview with Bernard Arnault, LVMH Chairman & CEO. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000272224.

All references must be sourced to CNBC.

CARL QUINTANILLA: OUR NEXT GUEST HAS TRANSFORMED THE LUXURY GOODS INDUSTRY DURING THE PAST 25 YEARS. LVMH'S 60 BRANDS COMPRISE WINES AND SPIRITS FASHION AND LEATHER GOODS, PERFUME, COSMETICS, WATCHES, AND JEWELRY. WITH ICONIC NAMES LIKE LOUIS VUITTON, DOM PERIGNON AND DEBEERS. BERNARD ARNAULT IS THE CHAIRMAN AND CEO OF LVMH, A MEMBER OF THE CNBC FIRST 25 LIST. HE JOINS US THIS MORNING FROM PARIS. BERNARD, CONGRATULATIONS AND THANKS SO MUCH FOR BEING WITH US. I WAS HOPING THAT WE COULD START BY TALKING ABOUT THE LATE '80S, WHEN THIS 25-YEAR PERIOD BEGAN. EVERYBODY IN THE WORLD THOUGHT JAPAN WAS GOING TO OWN THE PLANET EARTH. HOW DID YOU KNOW THAT LUXURY AS A CONCEPT WAS TRULY GOING TO GO GLOBAL?

BERNARD ARNAULT: WE DECIDED EARLY IN THE '80S THAT THERE WAS A LOT OF POTENTIAL WITH GLOBAL GROWTH TO SELL LUXURY PRODUCTS, AND MORE PRECISELY HIGH-QUALITY PRODUCTS. BECAUSE I THINK THE WORLD LUXURY MAYBE IS NOT COMPLETELY RELEVANT TO OUR INDUSTRY. WHAT WE TRY TO DO IS TO DO THE PRODUCTS OF THE HIGHEST QUALITY WITH A LOT OF ARTISAN, LIKE HAUTE COUTURE DRESSES THAT YOU SEE NOW, AND THE MARKET FOR THAT WAS EXPANDING, AS WELL AS LEVEL OF LIVING WAS GOING UP ALL OVER THE WORLD. AND THESE STRENGTHS HAS BEEN VERY STRONG SINCE THE '80S. SO TODAY, AFTER HAVING GROWN THE GROUP FOR THIS 25 YEARS, WE HAVE A PORTFOLIO OF AROUND 60 BRANDS. SOME OF THE BEST BRANDS, I THINK, IN THE WORLD.

QUINTANILLA: YES.

ARNAULT: WITH PRODUCTS OF THE HIGHEST QUALITY.

QUINTANILLA: AND YOU'VE BEEN QUOTED AS SAYING AFFORDABLE LUXURY. THESE ARE TWO WORDS THAT DON'T GO TOGETHER. WE'VE SEEN SO MANY COMPANIES, MANY OF THEM PUBLIC NOW HERE AT THE NYSE, THAT HAVE TRIED TO EXPAND THAT MARKET BY CREEPING SLIGHTLY DOWN ON THE PRICE SPECTRUM. DO YOU NOT BELIEVE THAT'S A SUSTAINABLE MODEL?

ARNAULT: I DON'T THINK THE RESEARCH FOR QUALITY IS COMPATIBLE WITH LOWER PRICES. YOU HAVE VALUES, BUSINESS MODEL. OUR BUSINESS MODEL IS BASED ON CREATIVITY, INNOVATION, AND QUALITY. AND IN DOING SO, WE ARE ABLE TO REALLY CREATE A RELATIONSHIP WITH OUR CUSTOMER ALL OVER THE WORLD, WHERE MORE AND MORE ARE LOOKING FOR THE BEST PRODUCTS. AND IN DOING SO, WE ARE CREATING NEW PRODUCTS. WE ARE ALSO EMPLOYING MORE AND MORE PEOPLE IN OUR ATELIER – FOR INSTANCE IN FRANCE WHERE WE CREATE THESE FANTASTIC LOUIS VUITTON BAGS AND ALL OF THE HAUTE COUTURE DRESSES. AND THIS IS A TREND, I THINK, IS GOING TO STAY FOR THE NEXT TEN YEARS, MAYBE. AND I HOPE FOR A LONGER PERIOD OF TIME. SO THE SEARCH FOR HIGHEST QUALITY OF PRODUCTS IS GROWING. YOU KNOW, I OFTEN COMPARE OUR INDUSTRY TO OTHER FAST-GROWING INDUSTRIES. FOR INSTANCE, I HAVE A GREAT ADMIRATION FOR APPLE AND FOR THE iPHONE. I HAVE MYSELF AN iPHONE. BUT CAN YOU SAY THAT IN 20 YEARS PEOPLE WILL STILL USE AN iPHONE? MAYBE NOT. MAYBE WE'LL HAVE A NEW PRODUCT OR SOMETHING VERY MORE INNOVATIVE. BUT WHAT I CAN SAY TODAY IS 20 YEARS FROM NOW, I'M QUITE CONVINCED THAT PEOPLE WILL STILL DRINK DOM PERIGNON.

KAYLA TAUSCHE: BUT EVEN SO, SOME FORCES, BERNARD, OVER THE LAST 25 YEARS HAVE CHALLENGED THIS IDEA OF EXCLUSIVITY THAT HAS BEEN THE HALLMARK OF LUXURY. YOU THINK ABOUT EMERGING MARKET GROWTH, E-COMMERCE AND THIS NEW PURCHASING POWER OF THE MIDDLE CLASS. HOW DO YOU MAKE SURE THAT DOM PERIGNON, THAT LOUIS VUITTON HANDBAGS, THAT SOME OF THESE PRODUCTS THAT ARE THE HALLMARK OF THE LUXURY INDUSTRY, STAY UPMARKET, AS YOU SAY?

ARNAULT: YOU MEAN THESE PRODUCTS, ARE REALLY RESEARCHED FOR THEIR OWN QUALITY. AND THE FACT THAT PEOPLE WANT TO COME TO VISIT, FOR INSTANCE, A DOM PERIGNON SELLERS, OR THE FANTASTIC LOUIS VUITTON ON THE CHAMPS-ELYSEES IS A SIGN THAT THEY WANT TO BE IN CONTACT WITH THE HISTORY OF THE BRAND. AND THERE IS A LINK BETWEEN THE HISTORY OF A BRAND AND THE FUTURE OF THAT BRAND. AND I THINK IT'S A REASON WHY WE HAVE BEEN SUCCESSFUL, BECAUSE WE WERE ABLE TO BUILD ON SOME HISTORIC ROOTS THAT HAVE BEEN CREATED IN THE PAST AND THAT ARE PROJECTING THE FUTURE. AND THIS IS A REALITY THAT PEOPLE FEEL ALL OVER THE WORLD. AND MORE AND MORE SO, ESPECIALLY IN EMERGING COUNTRIES WHERE PEOPLE ARE MORE AND MORE EDUCATED. SO I THINK THE FUTURE IS STILL VERY POSITIVE FOR THESE VERY HIGH-QUALITY PRODUCTS. I'M NOT SAYING THAT FOR OTHER INDUSTRIES SELLING MORE AFFORDABLE PRODUCTS, THERE IS NO FUTURE. NO. THEY'RE DIFFERENT MARKETS. BUT FOR OUR TYPE OF INDUSTRY, FOR THE CREATIVITY, THE INNOVATION THAT WOULD BRING TO A VERY HIGH-QUALITY LEVEL, AND MIXING WITH THE HISTORY OF OUR BRANDS, I THINK WE ARE MATCHING DEMAND THAT IS GROWING ALL OVER THE WORLD.

QUINTANILLA: BERNARD, SPEAKING OF DIFFERENT MARKETS, HOW MUCH DO YOU WORRY ABOUT ONE PARTICULAR MARKET GOING INTO A SEVERE RECESSION WHERE LUXURY BUYERS WOULD START TO DISAPPEAR? I'M THINKING OF CHINA AS AN EXAMPLE. IS THAT SOMETHING YOU SPEND A LOT OF TIME WORRYING OR THINKING ABOUT?

ARNAULT: YOU KNOW, I THINK YOU SPEAK -- YOU JUST SAID RECESSION, AND SPEAKING OF CHINA. MY DEFINITION OF A RECESSION FOR A COUNTRY THAT IS GROWING AT 7% AROUND IS NOT A RECESSION. IT IS A FAST-GROWING COUNTRY. IF YOU TAKE EUROPE, EUROPE CERTAINLY IS NOT GROWING AS FAST. I THINK CHINA, I WOULD SAY, MAY HAVE SOME BUMPS OVER THE YEARS AND HAVE BEEN THROUGH VERY, VERY POSITIVE TREND FOR MANY YEARS, ECONOMICALLY, THE BUYING POWER OF THE CHINESE POPULATION HAS BEEN INCREASED DRAMATICALLY. AND I THINK WE'LL CONTINUE TO BE INCREASED IN THE YEARS TO COME. AND THE FUTURE FOR OUR INDUSTRY, FOR OUR PRODUCTS AND FOR OUR RENTS IN THAT COUNTRY IS STILL VERY GOOD. BUT AS ALWAYS IN CHINA, YOU HAVE UPS AND DOWNS, AND IN SPITE OF WHAT YOU CAN CONSIDER AS A LOWER LEVEL OF GROWTH, IT'S STILL GROWING VERY FAST. AND FOR US, WE ARE SEEING IN OUR ACTIVITIES IN CHINA, STILL VERY GOOD LEVEL OF DEMAND, AND THE LEVEL OF KNOWLEDGE FROM THE CHINESE POPULATION ABOUT QUALITY EUROPEAN PRODUCTS IS GROWING VERY FAST. SO IT EXPLAINS WHY THE BEST PRODUCTS ARE STILL VERY SUCCESSFUL IN CHINA, AND WILL CONTINUE TO BE SUCCESSFUL FOR THE NEXT FEW YEARS. THERE ARE A NUMBER OF CHINESE CITIES THAT ARE BECOMING IN THE STAGE WHERE THEY CAN BUY HIGH-QUALITY PRODUCTS, IT IS GOING TO GROW AND CONTINUE TO GROW FOR THE NEXT 10 OR 20 YEARS FOR SURE. SO I'M CONFIDENT ABOUT THE FUTURE OF CHINA.

QUINTANILLA: WELL, BERNARD, YOUR TRACK RECORD OVER THE PAST QUARTER CENTURY WOULD SUGGEST YOU KNOW WHAT YOU'RE TALKING ABOUT WHEN IT COMES TO THE FUTURE. OUR CONGRATULATIONS, AND OUR THANKS AGAIN TO YOU. BERNARD ARNAULT, THE CHAIRMAN AND CEO OF LVMH IN A RARE TELEVISION INTERVIEW.

ARNAULT: THANK YOU.

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