Why designers are taking back control of their fashion companies

For many burgeoning brands, being a member of a luxury group is the key to growth and longevity.

Luxury conglomerates like Kering, LVMH and Richemont have the prowess and investment acumen to set up successful production and manufacturing processes, develop and expand collections and product categories, grow distribution channels, conquer new markets, open mono-brand stores and ultimately lend cachet with retailers.

Many British namesake brands, from Alexander McQueen to J.W. Anderson to Roksanda are part of a luxury group or investment portfolio which enabled them to grow their businesses. On a solo trajectory their growth may have taken a very different course.

Up until recently Stella McCartney was half-owned by Kering, a partnership that worked well for nearly 12 years, until she bought back the remaining 50 percent share in autumn.

Being under the umbrella of a luxury conglomerate has many benefits. One such benefit is bargaining power. If, for example, Balenciaga footwear is highly profitable for a store, but its men's wear is lagging in sales, the brand and parent company can step in to leverage their power, should a retailer wish to stop buying the clothes. Retailers are then 'required' to buy the product groups that may not be selling well, in order to keep stocking those categories that are profitable. "If you drop our ready-to-wear we will no longer supply you accessories," is not an uncommon discussion when it comes to negotiating a buy with a group-owned luxury brand.

Of course not all luxury groups and investment vehicles are equal. Growing a fashion brand requires much more than funding. It requires strategy, patience, creativity and vision. Most importantly it requires a long term approach.

This week London Fashion Week designer Roksanda hired Deloitte to find a new partner after current investor Eiesha Bharti Pasricha announced she was looking to exit the brand. Pasricha has owned a majority share since acquiring the brand in 2014, growing sales from 3 million pounds to 10 million pounds. But perhaps expectations were bigger, perhaps the return wasn't enough, or perhaps investors and brands are no longer seeing eye to eye.

It's about control

Brands relinquish control the moment they sell a majority stake to an investor. For example, when cool California t-shirt label C&C California sold 100 percent of its equity to Liz Claiborne, a middle and contemporary market conglomerate, the company lost its lustre. The original t-shirt fabric the founders used for their vintage, buttery soft t-shirts was replaced when new production processes were introduced. I remember this firsthand having worked with the company in London. New categories like sleepwear, loungewear and intimates were added to expand the brand, but they were not relevant to the core ethos. When high-end department stores like Barneys and Harvey Nichols began to drop the label, it marked the start of its downfall, and Liz Claiborne sold the brand from its portfolio only three years later to Perry Ellis Inc.

Control is key to remaining true to a brand's core values and resonating with customers. Oftentimes investors are in it for the short term: to develop, build and sell as much product as possible, maximise profits, then sell their stake. This not only happens to small luxury brands, but also giant companies. Take Gap and J Crew for example, both of whom were once the pinnacle of the American high street and who have been struggling to retain their popularity and profitability. "Gap brand’s assortment continues to look boring, with little effort being made to create newness" Neil Saunders, managing director of GlobalData Retail, told Reuters in August when Gap's shares fell 7 percent after a lacklustre trading announcement. J Crew is still trying to find its footing after the exits of Jenna Lyons, its former creative director, and longtime chief executive Mickey Dressler.

US luxury brand Proenza Schouler this week stated it was buying back shares in the company and taking back control via a round of private investors. That also means a shakeup of its management team, with CEO Judd Crane and CFO John Paolicelli exiting the business. In a joint statement, Proenza Schouler founders Jack McCollough and Lazaro Hernandez said that they "couldn't be happier" with the change in leadership, indicating that ownership would allow them to have "full authority over our company’s destiny."

In September Hernandez told BoF: "Maybe we’ll never be a billion-dollar brand, but maybe that’s fine. We don’t have to be.”

Perhaps that notion was shared by Christopher Kane, who in June announced the company was in discussions to buy back its business from parent company Kering. The conditions of which would allow him to take back full control.

Kane, unlike Jonathan Anderson, isn't also the creative director of another luxury brand owned by the same parent company.

Maybe Kane, too, doesn't have the ambition to be a billion dollar brand.

Photo credit: Proenza Schouler, source Proenza Schouler website

 

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