March 29, 2018, 11:48 pm / Lifestyle / Business Exclusively by subscription

How Stella McCartney will leave Kering

Buyback by a designer of his own brand from a financial investor - a unique case Anna Shilova Stella McCartney's collections did not become (and are unlikely to become) a revolution and an event that turned the world of fashion upside down; nevertheless, she is a designer with a recognizable style and, which is no less important in the era of media and social networks, an active social position / BEN STANSALL / AFP

Stella McCartney created her company in 2001: half of it went to the founder, the other to the Kering group (at that time - PRR); Until March 31, 2018, McCartney had an option to buy out Kering's share, and the designer exercised it on the flag.

“This is a once-in-a-lifetime opportunity, and not many designers who have their names on the sign get this chance,” McCartney told Women's Wear Daily (WWD). “I have four children, and here is the chance to take control of the incredibly exciting business that bears my name. As a woman, as a mother of four children, I had to take advantage of it.”

McCartney declined to comment on how she plans to finance the Kering buyout. “It is clear that her famous father, Sir Paul McCartney, will not finance the deal,” writes WWD. Another specialized publication, The Business of Fashion (BoF), reports that the billionaire musician will still help his daughter buy out the shares, although he adds that there is no official confirmation of this.

One way ticket

A designer's buyback of a stake in the company he founded is a rare, if not unique, phenomenon. As a rule, if a designer parts ways with the company he created (or a stake in it), it’s a one-way ticket. Designers are rarely good entrepreneurs, and the success of a brand as a business has nothing to do with the creativity of the designer. For various reasons (the main one being financial), even great designers sold their companies.

For example, Italian couturier Valentino Garavani in 1998 sold the company he founded (together with Giancarlo Giametti) Valentino SpA for $300 million - in the status of a master, a favorite of the stars, and so on. It was a successful deal: Valentino earned a lot of money and retained the position of chief designer, continuing to work in the fashion house named after him until the end of his career in 2007. The great Yves Saint Laurent was not so lucky. Founded by Saint Laurent together with Pierre Berger, the Yves Saint Laurent fashion house had to be sold to ELF Sanofi Beaute in the 90s. Which in 1999 resold most of the business, including the Yves Saint Laurent brand, to Gucci (now owned by Kering). Saint Laurent feared that he would not be able to find a common language with the new owners, and his premonition was justified. A year later, Alber Elbaz, whom Saint Laurent made his successor, was fired from his position as designer of the pret-a-porte line. In response, Saint Laurent and Berger opened their own haute couture boutique. But they could not repeat their previous successes and by 2002 they owed suppliers about $18 million. The story ended with Saint Laurent deciding to leave the world of fashion, declaring that it had ceased to be art and had turned into commerce.

At the same time, a change of owner or the appearance of an investor is not always a solution for the brand. Everything turned out well for Valentino. Despite repeated changes of ownership (at first Valentino himself sold it to the Permira investment fund, which, in turn, resold the brand in 2012 to the Qatari company Mayhoola For Investments), all key employees remained in the company. The main designers of the brand were Maria Grazia Chiuri and Pierpaolo Piccioli, who had worked with Valentino, the brand was successfully rebuilt and by 2017 its sales exceeded $1 billion, Stefano Sassi, general director of the brand, told Vedomosti.

Donna Karan did not have such a successful fate. The founder of the brand, designer Donna Karan, gradually reduced her stake in the company and, as a result, lost it to the LVMH holding, which in 2016 resold the company to the G-III Apparel fund for $650 million. This was followed by a change in management and design team, but the business is still stagnating.

The power of a surname

Stella McCartney's career and business have so far been on an upward trajectory. The legendary surname, as well as the lifestyle and social circle of her family, allowed the girl to easily enter the world of fashion. At the age of 16, still without any special education, Stella trained with Christian Lacroix (then the designer was at the peak of fame and success), as well as with Edward Sexton, one of the Savile Row tailors who dressed Paul McCartney for many years.

Stella graduated from one of the best specialized educational institutions in the world - Central Saint Martins College of Design. Top models Naomi Campbell and Kate Moss, her friends, took part in the show of her graduation collection. Leading fashion magazines wrote about the show, and the collection itself was purchased by major department stores, including Bergdorf Goodman and Neiman Marcus. Two years later, McCartney was invited to the French brand Chloe (owned since 1985 by the Richemont holding), where Stella replaced Karl Lagerfeld himself as creative director. The “Kaiser of Fashion” did not hide his skepticism towards the successor at the time and stated that, in his opinion, McCartney was invited because of his big name, which “means a lot in music, but nothing in fashion.” Lagerfeld's skepticism was not justified. Sales of Chloe grew, fashion critics praised Stella.

And just three years later she decided to leave the French brand and start her own. Buyers accepted Stella McCartney clothes favorably, and already in 2003 the first perfume appeared under this brand (Stella McCartney perfumes are produced by P&G Prestige Beauty). In 2004, McCartney began collaborating with Adidas, and over time this cooperation grew into a separate brand - Adidas by Stella McCartney. In 2012, the partners first made uniforms for the Great Britain team, which they wore at the home Olympic Games in London. Four years later in Rio de Janeiro, British Olympians and Paralympians also competed in Adidas by Stella McCartney uniforms. Today, Stella McCartney collections can be purchased in retail stores in more than 100 countries and in the brand’s own boutiques, the number of which has grown to 51, WWD notes.

Loud voice

At the same time, McCartney continued to expand her connections and strengthen her social contacts. It is known that she is friends with the founder of the Garage Museum of Contemporary Art Daria Zhukova, actress and Oscar winner Kate Hudson, designer Diane von Furstenberg, American top model Karlie Kloss, etc. The ability to make the right connections has always been useful, and now it is often more important than many other skills.

View / 3 photos

Stella McCartney's collections did not become (and are unlikely to become) a revolution and an event that turned the world of fashion upside down; nevertheless, she is a designer with a recognizable style and, which is no less important in the era of media and social networks, an active social position. McCartney is a committed vegetarian and supporter of the ethical treatment of nature. She was one of the first in the fashion world (and the first in the luxury segment) to abandon the use of natural fur and leather. Nowadays it is becoming more and more fashionable, many large brands have abandoned fur, but in 2001 it was unthinkable to sell bags and shoes made of leatherette. Moreover, the price of these products from Stella McCartney was comparable to analogues from competing brands.

How will they part?

Stella McCartney released its first men's collection

It is dedicated to the father of the brand designer Paul McCartney and The Beatles

According to WWD, Stella McCartney's exit from Kering will take two years: in the first year, all financial procedures will be completed, and in the second year, the companies will complete all other joint processes.

“This is a very important choice for me, and I have weighed everything,” McCartney said. “If I didn’t think we could do it, we wouldn’t do it.” The decision is based on the fact that I really feel that we have everything [for an independent business]. I'm a designer, but I'm also an independent businesswoman, and we're a healthy business."

The transaction amount is not disclosed, nor is Stella McCartney’s turnover. (Kering publishes data only about its major brands - Gucci, Yves Saint Laurent, Bottega Veneta, Puma). Turnover in the British division of Stella McCartney in 2016 increased by 31% and amounted to 41.7 million pounds, WWD writes with reference to the official register of British enterprises Companies House. Profits for the period rose 42.5% to £7m. Annual global sales could be $150–200 million, BoF suggests. Stella McCartney's annual turnover is higher thanks to licensing agreements with Adidas by Stella McCartney, the Italian company Isa (swimwear and lingerie), and P&G. These agreements will continue to apply after the divorce, as well as the licensing agreement with Kering for the production of glasses, writes WWD.

McCartney has said she has no plans to go public and has no immediate plans to bring in a new business partner, although industry sources say potential investors have expressed interest in the brand and the designer is holding exploratory meetings and talks.

“I am extremely proud of what Kering and Stella McCartney have been able to achieve together since 2001,” Kering owner and CEO Francois-Henri Pinault said in a statement. “McCartney and her team bring much more to Kering than just business.” “Stella knows that she can always count on my friendship and support,” Pino added.

Kering is focusing on its long-standing intention to streamline its portfolio of brands and become a purely luxury player, writes Reuters. Now the holding is reducing its portfolio; one of its latest announcements is the decision to reduce its stake in Puma. Stella McCartney is a small brand on the scale of Kering and, most likely, somewhat dilutes overall profitability. “Stella McCartney is associated with the ready-to-wear and sportswear segments. Kering realized that it was difficult to build on Stella McCartney's legacy in other categories, such as leather goods, as it does with brands such as Balenciaga or Alexander McQueen,” a luxury market analyst at Mainfirst was quoted as saying by the Financial Times.

Previously on the topic: Stella McCartney: “I treat business like raising children”