Richemont/Prada Deal Rumor: Might Not Be True, But Let’s Hope It Is

Execs at Prada have vehemently denied the NY Post report that luxury goods conglomerate Richemont might scoop up a 30% stake in the company, which has amassed $1.7 billion in debt after failed acquisitions of Jil Sander (now owned by private equity firm Change Capital Partners) Helmut Lang (now owned by Link Theory Holdings) and others over the last two decades. I–and my sources–are not so sure that the report is true, but I’m also not going so far as to say that I think it’s “silly,” as an anonymous person did in WWD this morning. They’ve most certainly talked to Richemont over the past six months.

Why? Because they’ve had to. The fact is, Prada is in some deep sh*t and they need a trustworthy company with lots of money to help pull them out. While designer Miuccia Prada remained a critical favorite over the last decade, her husband–CEO Patrizio Bertelli–is seen by industry insiders as somewhat of a piranha. Along with the bad business decisions Bertelli’s made–numerous attempts at an IPO, poorly executed acquisitions and increasing the price point of the Mui Mui diffusion line, thus losing the entry-level luxury consumer as a customer–the label has also gotten flack for its diminished quality and questionable labor practices (best illustrated in Dana Thomas’ 2007 investigation Deluxe: How Luxury Lost Its Luster).

Do I think Richemont is the right conglomerate to pull Prada out of the red? Maybe. Like the Post says, it’s marquee brands are jewelry and watch makers, including Cartier, IWC and Van Cleef and Arpels.

However, Richemont also owns well-regarded and popular fashion labels Chloe and Alaia, which Prada would fit well with. However, as much as Prada could use the added infrastructure sure to be provided by Richemont, in the end it will be a private investor that saves the company. I just can’t see Bertelli giving up that much control, unless there’s some sort of hostile takeover.

Decade List: Ten Moments In Fashion That Changed The Business

Like every industry, fashion suffered quite a bit in the Naughts, with enough shuttered labels and disgruntled consumers for an aspiring fashionista to throw in her Hermes towel. However, in my opinion, the triumphs outweighed the missteps.

While the democratization of fashion may have feathered some ruffles, it–in the end–helped to establish a stronger, more lucrative industry. Here, in the spirit of those top ten lists that I know you love reading, I’ve named the ten moments over the last ten years I that believe changed the business of fashion. Maybe not forever, but at least for now.

2000: H&M Opens in the US
In high school, I read a lot of British magazines. (Yes, I was a bit of an anglophile, watching Are You Being Served when I didn’t have lacrosse practice after school.) I soon understood that while British women were terribly obsessed with fashion, they were also obsessed with not paying exorbitant amounts of money for said fashion. In the pages of British Vogue I discovered H&M, a Swedish retailer that sold clothes rivaling Target in price and Prada in style. By the time I was interning in New York City at a downtown magazine, H&M had arrived on 5th Avenue.

After work I’d take the N up to Rockefeller Center and spend an hour rifling through racks of asymmetrical blouses, wide-leg trousers and colorful plastic baubles.  H&M went on to change American retail, heralding in the concept of fast fashion–clothing that is made cheaply, stylishly and above all, quickly. Soon enough, European favorites like Zara, Topshop and Mango were also infiltrating US shores, leaving All-American basic labels like Gap and Abercrombie & Fitch in the dust.

2001: Vente Privee Launches
Remember life before Gilt Groupe? If you responded by saying “not really,” you’ve got to thank its predecessor, the France-based Vente Privee. You all know the story: Company launches exclusive online sample sales, reports $800 million in revenue in 2008. A decade later, the private sale is the hottest retail model around.

2001: PPR Wins Gucci
After an epic battle between billionaire Bernard Arnault of Moet Hennessy Louis Vuitton (LVMH) and billionaire Francois Pinnault of PPR, the latter finally gained control of the Gucci Group, which includes Gucci, Bottega Veneta, Yves Saint Laurent and more. As PPR moved from discount retail into the world of high luxury, it was obvious to designers that being a part of a big conglomerate like LVMH, PPR or Richemont was a way to build a brand without sacrificing design integrity. The corporate infrastructure of these companies helped brands like Balenciaga, Stella McCartney and Edun to increase profits through fragrance, accessories and other well-thought-out licensing deals.

2003: Target Signs Isaac Mizrahi
When Target brought him on to design a women’s fashion collection in 2003, Isaac Mizrahi was nothing more than a 1990s flash in the pan, better known for his documentary Unzipped and a short-lived talk show than beautiful preppy-glam clothing. Yet women couldn’t get enough of what Mizrahi offered at Target: Shiny shift dresses, polka dot blouses and pointy flats. By 2005, the cheap-chic collection garnered $500 million in sales for Target. Mizrahi has since moved onto Liz Claiborne, but his work at Target made it okay for high-end designers to collaborate with low-end retailers.

2004: Rachel Zoe Becomes a Household Name
While celebrity stylists have been around for decades, it was the Naughts that made them rich and independently famous. When Rachel Zoe transformed train wreck Nicole Richie into a chic hippie, she also made big sunglasses, tiered prairie dresses and honey-highlighted hair the look du jour. Today, stylists command thousands of dollars per day for their services, and more and more young women are clamoring to follow in their footsteps.

2005: LVMH Sells Lacroix, Proving that Fashion is More About Commerce than Art
After standing by his money-sucking side for nearly 20 years, LVMH exec Arnault finally sold off Christian Lacroix’s failing fashion business to Florida-based investment company Fallic Group for a measly 2 million euros. We all know how the story ended: Fallic was unable to revive the brand, which made beautiful six-figure couture dresses but could not connect with a consumer at the fragrance, accessory and ready-to-wear levels. It was reduced to a licensing operation at the end of 2009. As sad as it is that Lacroix is not making his beautiful dresses, his struggles serve as an example for the rest of the fashion industry. The lesson: If you want to stay small, stay small, but if you want to make a lot of money, you’ve got to play by retail’s rules. Design may be an art, but fashion is a business.

Jil Sander and Others Lose the Rights to Their Own Names
Another indication that fashion is serious stuff: After disagreements with their corporate backers, designers like Jil Sander, Helmut Lang and Camilla Staerk have lost the rights to their name brands, which are also their given names. Jil Sander returned with +J for Uniqlo, Lang stopped designing altogether to do fine art and Staerk now designs under her surname.

Versace, Ferragamo and Prada Hint At–But Don’t Go Through With–IPOs
From whispers at Salvatore Ferragamo and Versace in 2006 to Tommy Hilfiger, and Prada’s de-listing–then hopes of re-listing–at several points throughout the decade, many fashion companies sought out public funds, but for one reason or another, were not able to actually attain them. Of course, the 2008 crash made raising money even more difficult. Yet Hilfiger, Versace and Prada still haven’t ruled out public offerings. The Teens may just be the decade of fashion IPOs.

2005: LVMH Starts Suing the Heck out of Copyright Infringees
From eBay to Wal-Mart to Bad Boy Records, LVMH crusaded against counterfeit handbags and copyright infringements in the last half of this decade. The lawsuits resulted in an industry-wide debate over what could-and couldn’t-be copied. Intellectual property lawyers prayed to the Louis Vuitton gods each day, thanking them for making their profession more lucrative than ever.

2006: Tom Ford Proves You Can Still Build A Luxury Brand From (Almost) Scratch
After years of conglomerates buying the rights to old fashion houses and hiring the Next Big Designer to revive the brand, Tom Ford did something radical. He broke away from Gucci (where he had played the corporate fashion game, making both said brand and YSL financially viable) and launched a label under his own moniker. Tom Ford currently consists of fragrance–a partnership with Estee Lauder–men’s suiting, shirts, shoes, sunglasses and a few discreet shops that keep customer’s measurements on file for bespoke services. Next step? Women’s wear. Could Ford be THE brand of the Teens? I sure think so.

Here We Go Again: Bill Blass Hires Jeffrey Monteiro As Its New Design Director

Since its founder retired in 1999, Bill Blass Ltd. has gone through a slew of owners and designers. On December 17, current owners Peacock International Holdings hired Mayle and Derek Lam alum Jeffrey Monteiro as the brand’s new design director.

Monteiro is clearly talented–I am actually a huge fan of his work, especially what he did at Mayle– but I don’t think this sounds promising.

Why?

1. None of these past arrangements have ended well. NexCen’s acquisition of the brand in 2007 was particularly scandalous. While designer Peter Som’s attempt at reviving the label was well-received by buyers–sales went from $2 million 2006 to $34 million in 2007–there were plenty of problems behind the scenes.

NexCen, an acquisition and management company with an expertise in food retail, revealed that it had “forgotten” to include $21 million worth of debt on its balance sheet, which means it had to sell one of its companies immediately in order to avoid going bankrupt. (It ended up restructuring its debt and was de-listed from the NASDAQ stock market. At the end of 2008, NexCen finally sold Bill Blass to Peacock.)

2. I’m a huge proponent of reviving a once-dead fashion house by injecting new talent, but…I think the reason the folks behind Blass–meaning all owners and designers from 1998 until now–have not succeeded has plenty to do with timing. Might it be too soon after the namesake’s reign to revive the brand? The ones that have been truly successful–Chanel, Chloe, Lanvin–have been afforded huge gaps between the time the original designer was working and the time the new designer came on board.

Even Calvin Klein’s successor Francisco Costa–whose clothes are beloved by fashion insiders–doesn’t do it for me. It’s not Calvin Klein–it’s Francisco Costa by Calvin Klein–and while that’s nice, it doesn’t have the same appeal as the man whose clothes I admired so much as a child. (My mom and dad were both Calvin devotees.)

3. What’s more, even if the talent is there–as it is with Monteiro–the management may not be up for the challenge. I don’t have to explain that Peacock and LVMH–who successfully revived such labels as Louis Vuitton and Celine–are two very different companies: One has never dealt in high fashion; the other rules high fashion. Halston is another example of a label whose revival suffered from an unprepared management team. (Although the team–including Harvey Weinstein–is trying again for Fall 2010 with London “it” designer Marios Schwab.)

While I wish Monteiro and the new Blass team the best of luck, I hope that they understand this: Legacy is a gift, but it’s not a guarantee.

Ten Fashion Labels Investors Should Be Watching

Alexander Wang Spring 2010, via Style.com.

M&As are back! Well, at least according to a recent survey conducted by accounting firm Ernst & Young. Indeed, one-third of businesses are likely to buy other companies over the next year.

What does that mean for the fashion industry? Luxury conglomerates and private equity firms are probably paying closer attention to the businesses behind successful independent designers.

I’ve highlighted ten labels that might make for a good addition to an already strong portfolio of brands, or a smart investment for a private equity firm that would like to dabble in the “glamorous” fashion industry.

These aren’t no-names; they’re hot labels that show very few weaknesses in terms of design and branding choices. What many investors forget when they delve into fashion is that unique clothing is only a tiny sliver of what it takes to run a successful designer label. Commercial viability and diversity in offerings are bigger factors.

Sorry, but you won’t find the next Christian Lacroix on this list.

Alexander Wang
He may be a 20-something scenester who describes his aesthetic as “Model Off Duty,” but the Alexander Wang mini-empire is serious business. Along with a ready-to-wear collection, the designer has introduced a successful t-shirt line, accessories and now menswear. And with his rugby-inspired spring 2010 collection, he proved to critics that instead of a one-trick pony, he was the new definition of American sportswear.

Band of Outsiders
CFDA winner and filmmaker Scott Sternberg’s men’s collection Band of Outsiders and its female counterpart B.O.Y. appeal to hip preppies with a taste for fine tailoring. His grosgrain ribbon high-heel sandal collaboration with Manolo Blahnik was genius, as is his long-term partnership with boat shoe kings Sperry Top-sider. Sternberg understands that partnering with mass market brands can reinforce trust in your own label if the collaboration seems genuine. I could envision Tom Ford–who is also a designer/director–scooping up this label as his own empire grows.

Pieces from Steven Alan's holiday collection.

Steven Alan
Liberty floral printed dresses, plaid button-downs and Breton shirts. I’d say that Steven Alan played a pretty big role in bringing these classic styles to the fashion forefront. The company is comprised of several stand-alone boutiques, a showroom and a wholesale label. In my mind, SA could become the 21st century version of the Gap. (Particularly because concept stores have replaced specialty retailers as the shopping channel of choice.)

3.1 Phillip Lim
“Classics with a sense of madness.” That’s how Lim describes his collection of lipstick red double breasted blazers, metallic brogues, cozy cardigans and dotted dresses. With the help of whip-smart chief executive Wen Zhou, Lim has gone from indie label to successful lifestyle brand in five years. (2009 global sales are estimated to reach $48 million.) While the company currently has no outside investors and is not recruiting them, Zhou and Lim aren’t totally cold to the idea. “Never say never,” they once told me in unison.

Luella
I know, I just wrote a post explaining why I believed Bartley’s business failed. But I also said that if under the right supervision, it could be revived. Her point-of-view is too original to ignore.

Rachel Comey
A former Theory menswear designer, Comey’s signature style is librarian-chic. There are plenty of quirky prints and unique silhouettes, favored by girls (and guys) that care less about looking sexy than they do about looking cool. But where Comey really succeeds is footwear, with flat boot styles and lace-up oxfords that have been imitated by lesser labels. If she gets her manufacturing in check–while the designs are beloved, I’ve hear more complaints about the quality of RC footwear than any other indie label–she could fold easily into a portfolio such as Renzo Rosso’s, which also includes Diesel and a majority stake Maison Martin Margiela and Sophia Kokosalaki.

Zero + Maria Cornejo
Brooklyn-based, Chilean born Cornjeo makes graphic, well cut clothes that never date. One caveat: While Cornejo does inject a few trendy pieces into her roster each year, her aesthetic is rarely altered. That’s a good for thing devoted customers, but it’s something investors don’t love. They look for newness, because newness means more, different customers. However, robust and stable sales should be enough to woo the level-headed.

A sold-out Kane dress from his spring 2009 collection.

Christopher Kane
He may already be under the wings of Donatella Versace, but that S.p.A. has enough of its own problems. In the eyes of insiders: Christopher Kane is perfect! He’s THE fashion darling! Why? Because he makes clothes that are far ahead of the trends, yet still wearable. (You can throw on a Christopher Kane dress for a cocktail party, for work even. The only place Gareth Pugh garb is acceptable is on stage.)

Jen Kao
A New York knitwear designer that’s cool enough for 15 year olds to admire, but luxe enough to for 40 year olds to buy. Sounds like Jen Kao has the Chanel success formula down pat. Her leather pants, whisper thin sweaters and subtle palette of nude, grey, black, navy and lavender appeal to all ages.

Tim Hamilton
I fell in love with Tim Hamilton’s menswear after I saw a cobalt blue v-neck featured on men.style.com. The designer–who produces quite a bit of his product in Europe and even shows his women’s collection in Paris–offers a luxe take on American sportswear that feels very new. Plus, he’s a terribly friendly and accommodating person. That can take you far in any business setting.

Corto Moltedo "Kryptonite" clutch.

Corto Moltedo
This Paris-based accessories line, launched in 2004 by the son of the founders of Bottega Veneta, is totally modern but created in an old-school way. Designer Gabriel Moltedo produces all of his calf leather “cassette tape” clutches and soft python shoulder bags in his own factory outside of Florence, which means his prices are more reasonable than competitors. (Say, between $300 and $2,00 for a gorgeous Italian leather bag.) And with his father serving as a mentor, he’s already built a following with Hollywood and fashion types alike.

Related Stories
Bye Bye For Now, Luella: Did The “It” Bag Seal Your Fate?
Billionaire Lakshmi Mittal’s Daughter-in-Law Scoops Up Escada

Bye Bye For Now, Luella: Did The “It” Bag Seal Your Fate?

It was announced this morning that British fashion label Luella has stopped trading, meaning that no orders for the Spring 2010 collection will be fulfilled.

Luella Bartley said that her financial backer VSQ Limited–a subsidiary of Club 21, a global licensee–pulled out after the Italian manufacturer used by the designer closed last month.

Bartley, no doubt, will eventually find another financial backer. But those who step in will need to do a bit of restructuring. Yes, financial conditions seem to be at the core of Luella’s troubles. But there were signs of weakness long before the market crashed.

If you’re not familiar with Luella, here’s a quick summary: Bartley is a fashion journalist-turned-designer who creates quintessentially English-girl clothes. Her collections are a magpie mix of country florals, punk leather jackets and school-girl skirts, appealing to Alexa Chung-types. For fall, she did a fun collection replete with preppy wool blazers, secretary blouses and corseted mini dresses.

While Bartley’s clothes are certainly lovable (and priced fairly; a dress is about $800), it was her “Giselle” bag that made the brand known beyond the London scenester set. Introduced in 2003, the Giselle, shown here, fell smack into the middle of the “It” Bag craze. However, its novelty soon wore thin, and it’s rarely seen today.

From this knowlege, I infer that Luella was able to receive plenty of financial backing based on the success of the Giselle bag. When sales for this bag fell, though, the rest of the company declined with it. This suggests that, while accessories can make a designer brand financially stronger, they can’t save it if trends change drastically.

Will the Giselle, like Marc Jacobs’ Stella or Chanel’s 2.55, someday become a classic that stages a comeback every few years? Probably not. Next time around, the suits will have to look at what’s truly at the heart of the Luella brand–to me, it’s the playfulness of each piece–and try expanding on that, rather than some flash-in-the-pan product.

Newsweek’s Take On Versace: Good Stuff

Think long-form journalism is dead? In fashion, I’d argue that it’s never truly been alive. But it doesn’t have to be that way, as Paris-based journalist Dana Thomas’ piece for Newsweek on Versace proves. It’s a critical piece that doesn’t shy away from the truth of the matter: that this company is in deep trouble financially and aesthetically. I would have liked to see more colorful analysis on the current business–most of the numbers are from reporting Thomas seems to have done in the 1990s, and she doesn’t detail the differences between the brand’s current style vs. its look while Gianni was alive–but overall, it’s a good read. Here’s the best bit:

All agree that the Versace name still has value, even if consumers no longer know what it stands for. Many in the fashion industry believe it’s time for the brand to continue without Versace family involvement—and some suggest that the family is starting to accept this idea too. Last year, Santo was elected to the Italian Parliament. Allegra has been attending Brown University and has said her dream is to become an actress. And will Donatella remain at the helm? “Maybe,” says the former Versace executive. “Then again, maybe not.” Which, after a decade of turmoil, may be the best thing for the company after all.

If you like this piece, I suggest picking up Thomas’ book Deluxe: How Luxury Lost Its Luster.

Billionaire Lakshmi Mittal’s Daughter-in-Law Scoops Up Escada

Cars. Appliances. Overly-sequined dresses.

One of these things is not like the other. Yet yesterday, it was announced that Megha Mittal–daughter-in-law of billionaire Lakshmi Mittal–acquired bankrupt German fashion brand Escada for a reported 30 million euros. The Mittal family, which made its fortune in steel, producing everything from kitchen appliances to building materials, now owns a fashion brand that currently employs 2,300 people worldwide. Escada is best known for, in the bluntest terms, flashy clothes for flashy people. Think lots of hot pink, sparkles and leopard-printed pussy bow blouses.

The question, of course, is WHY? My suspicion is that Mrs. Mittal is an Escada customer and that this will be her baby. The 33-year-old does have a degree from Wharton Business School. Overall, I’d say this is a good thing for the struggling brand. The other bidder was a private equity firm, and we know that all they want to do with fashion brands is pump and dump. If Mittal has passion for Escada, the resources she can provide–not only money, but help with infrastructure and rebuilding–will prove fruitful. Despite my personal distaste for the aesthetic, I do think it’s marketable. I know that Neiman Marcus, which is based in Dallas and caters to the southern socialite, is a big Escada client. There will always be a cohort of women after that “Giorgio Beverly Hills in the 1980s” look. Good luck to Mittal and the Escada team.