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.

What Really Happened At Phi?

Phi, a much-hyped fashion label based in New York and backed by Susan Dell (yes, wife of Dell computer founder Michael Dell), announced yesterday that it was closing its doors due to recessionary woes.

I’m sure the recession had something to do with Phi’s shuttering, but I can’t help but question the real motivation behind this closure. How could a brand with so much hype and positive press fail during what seemed like its pinnacle?  (It was beloved by the folks at Vogue and also well-dressed socialites like Vanessa Traina and Dree Hemingway.)

In the end, Phi is pure proof that hype–and great press–doesn’t always result in sales. As a source familiar with the situation told me this morning, “It was just too niche. Great design, very hip and cool. But it appealed to a very limited audience.”

The source went on to say that Susan Dell was still pouring quite a bit of money into the company; she didn’t want to fund it any more.

What differentiates Phi from a similarly-styled–but infinitely more successful–brand like Alexander Wang? Momentum. Wang burst onto the scene in 2007 and quickly became a commercial hit. Phi, on the other hand, launched in 2003 and only began attracting substantial attention from the consumer press over the past two years. In fashion, like any other business, success has a lot to do with timing.

Made In Italy On Madison: A Longer, Less Spastic Version Of Fashion’s Night Out

If you’re planning on doing some holiday shopping in New York City anytime between now and December 22, consider taking a stroll down Madison Ave. Particularly between 57th and 78th Streets.

There, you’ll “experience” Made in Italy on Madison, a series of events sponsored by the Italian Trade Commission with support from Hearst and the City of New York. More than 30 stores–including Gucci, La Perla, Max Mara and Roberto Cavalli–are participating in the festivities, which include cocktail parties and shopping events ripe with Prosecco, tartine and even some discounts. For instance, upscale lingerie boutique La Perla will host a men’s shopping evening from 4-8pm on December 17, complete with rounds of cocktails and a gift with purchase. And on December 18, Furla will host a festive holiday party from 5-8pm.

While Fashion’s Night Out was a bit of a cluster f*ck for many attendees, I can almost guarantee that you’ll enjoy yourself while visiting these boutiques. You probably won’t see many celebrities–and definitely not Anna Wintour–but you may buy a thing or two. Which is precisely the point.

Are Luxury Retailers Doing Better Than Assumed This Holiday Season?

Listening in on Neiman Marcus Group CEO Burt Tansky’s analyst conference call on December 9, one couldn’t help feeling depressed. Tansky, who oversees upscale department stores Neiman Marcus and Bergdorf Goodman, said that the luxury sector’s “challenging retail environment” was likely to go on for “an extended period of time.”

In the company’s most recent quarter–ending October 31, 2009–it saw year-over-year sales decline by 11.9% (to $868.9 million) and y-o-y profits shrink by 34%. In November, y-o-y comparable store sales decreased by 9.7%.

Yet if data from online personal finance service Mint.com is any indication, sales during the holiday season should be okay. Mint tracked spending per user at four retailers over the last year, and you can see that there’s been a significant increase. Definitely not as good as during the boom years, but okay. Especially for Nordstrom, which began providing online shipping to 30 different countries last month.

While it’s a little disconcerting that Banana Republic is included in the luxury mix, Mint does have access to thousands upon thousands of credit card and bank accounts, so it’s safe to say that these numbers are pretty accurate. Maybe there’s hope for the luxury retailer after all.

Breaking: Chanel Bags Being Sold At Costco?!

According to the NY Post review of the new Manhattan Costco store, there are classic Chanel handbags being sold at the discount retailer. I’ve contacted both Chanel and Costco for a comment. This is hard for me to believe. I’ll update as soon as I know more.

Update: Unsurprisingly, neither Chanel nor Costco have responded to my messages regarding this matter. But I’m going to keep on them.

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.

Why Hermes Is the Apple Of Its Industry

As a lifestyle reporter at Forbes and Forbes.com, I covered fashion and luxury industry news, but I also investigated trends in other areas of design, such as home decor and letterpress printing. I’ve always had a personal interest in product design, so I searched for stories in that world well.

Here’s what I learned. No matter what area of industrial design you’re examining–from cars to kitchen gadgets to medical equipment–the designers, marketers and executives at these varied companies live by one mantra: “I want to be the Apple of my industry.” In fashion and luxury, upcoming brands prefer the saying “I want to be the next Hermes.”

Hermes and Apple are very different companies. One is 172 years old, the other is just 33. Hermes makes money by employing technology similar to what was used when it was established in 1837. Loyalists love that each Hermes leather saddle, bag or boot is handmade in France with only the finest materials. The company even opened its own crocodile farm in early 2009 to keep up with demand for its exotic-skinned belts and purses. Conversely, Apple is lauded for advancing technology and spurring seismic shifts in specific industries. The iPhone, for instance, was a game-changer in the mobile market.

But as different as they are, Hermes and Apple operate on a similar platform: Offer the consumer something that they can’t get anywhere else. That’s why Hermes’s 10.2% year-over-year sales increase in the third quarter of 2009 (to $671.4 million), announced today, doesn’t surprise me. (Wholesale trading isn’t as strong as sales at the group’s own stores, which saw a y-o-y increase of 12%.)  Of course, a lot of that growth is in China, where 55 people are said to be made millionaires each day. But Hermes execs also remarked that sales in Europe and the US–or the “more mature” luxury markets–were also strong. (Competitors LVMH (Moet Hennessy Louis Vuitton) and PPR (owner of the Gucci Group) saw y-o-y sales decrease by 3% and 7.6%, respectively, in the third quarter of 2009.) Apple’s most-recent quarterly sales were up 25% year-over-year to $9.87 billion.

Those numbers–bad economy or not–could make any entrepreneur want to aim to be the Apple or Hermes of his or her industry. Is it a good idea? Probably. Just try to remember what too many companies–big and small–forget: It’s not just the marketing that makes Hermes and Apple so successful. It’s the product. A product that outshines any and all competitors in terms of quality and performance will almost always succeed. Seems like common sense, but there wouldn’t be so much crappy stuff out there if it was.