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.

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.

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