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PARIS — It’s truly a pregnant moment for Chloé.
Not only is creative director Phoebe Philo expecting her first child in two months — and working on an infants’ line — the high-flying French firm is embarking on an aggressive expansion drive that could see it become a billion-dollar baby for parent Compagnie Financière Richemont.
“We multiplied the sales by five in the last five years, and we plan to do that again,” said Ralph Toledano, chairman and chief executive officer. “Chloé could be a billion-dollar company if you include all licensed products.”
Toledano outlined a multiyear plan that includes:
- Leveraging brand awareness by more than doubling communication and advertising spending.
- Expanding into costume and fine jewelry, watches, lingerie and baby apparel.
- Kick-starting its diffusion and fragrance businesses.
- Expanding the retail network, starting with flagships in Beijing and Tokyo in 2005.
Although he declined to give precise figures, Toledano revealed that parent Richemont would invest “tens of millions of euros” during the expansion phase — and he allowed that profitability at Chloé would be compromised in the near term.
“The group is supporting us because they see we have a major growth opportunity,” he said in an exclusive interview at his sparsely furnished office above the Chloé boutique on Faubourg Saint-Honore here. “I think Chloé is now a fashion leader. What we have to do is take advantage of that. What we have to do now is increase the brand awareness. It’s key to our future growth.”
To that end, spending on communications will more than double and advertising budgets will triple next year, he said. The former category includes runway shows and the public relations functions.
Market sources estimate the Chloé brand generates wholesale volume of about $200 million, with Europe and the Middle East representing about 40 percent of revenues; the U.S. and Japan, each 25 percent, and Asia-Pacific, 10 percent.
Over the past five years, Chloé’s annual growth rate stood at 36 percent, and Toledano said a 35 percent pace is a sustainable goal for the coming years.
So far, he’s off to a good start. Philo’s acclaimed fall-winter collection of delicate, bow-festooned dresses, dashing capes and wide-legged trousers is proving a hit with more than just fashion editors. Brand sales in July and August were up 55 percent over a year ago, placing the brand on track to post plus-50 percent growth this year.
“We know our clientele,” Toledano said. “Now we have to expand our clientele.”
The explosive sales growth in recent years largely reflects a diversification effort on the product side. For example, handbags and small leather goods, once nonexistent, today represent about 30 percent of direct revenues, driven by such hits as bracelet, sling and camera styles. Licensed products also multiplied, including the See by Chloé diffusion line and eyewear.
Ready-to-wear represents about 70 percent of direct sales, with the balance being handbags and leather goods.
As for future product expansion, Toledano said costume jewelry and baby clothing would be introduced for spring 2005 retailing, the latter initially in Chloé stores only. Others, like watches and fine jewelry, will be layered on in the next two years.
Toledano said fragrance, licensed to Unilever, is also a top priority, though he declined to give specifics about any forthcoming launches.
“This business is a major growth opportunity for us and it will have to move fast and big time,” he said. “Chloé will move in this area.”
Believed to generate some $110 million only a decade ago, Chloé’s fragrance business has dwindled in recent years amid management turmoil at Unilever.
Direct retail, which generates about 40 percent of Chloé revenues, is another priority.
At present, Chloé operates freestanding stores in Paris, New York, London, Hong Kong, Taipei, Munich, Moscow, Monte Carlo, Dubai and Kuwait — plus about 40 leased departments, about half of them in Japan.
Besides Beijing and Tokyo openings in 2005, Toledano said a larger Paris boutique is a priority, along with new headquarters for a company that is bursting at the seams in its current location.
Toledano has a strong track record of picking design talent prior to joining Chloé in 1999, having plucked a then-unknown Alber Elbaz from the studio of Geoffrey Beene for Guy Laroche, where Elbaz catapulted on to the international fashion radar.
“When I hired Alber, it was based totally on intuition. You have to believe your intuition,” he stressed. “I respect [designers] and I trust them.”
Appointing Philo, who worked invisibly as Stella McCartney’s assistant at Chloé before McCartney exited to launch her own label with Gucci Group, as Chloé’s new design leader looks like another perfect match.
Indeed, Toledano praised Philo’s growing maturity and design confidence. “She’s now really self-assured,” he said. “She has a clear understanding of what the brand is; she makes decisions; she knows what she wants. She’s very focused.
“We now have in this company a team. We have very clear guidelines in terms of creation, in terms of marketing, in terms of communication,” he continued. “We have built the foundation for a very interesting growth.”
For many years, some in the industry assumed Richemont might dispose of Chloé, the only women’s rtw business in a group prized for its clout in hard luxury with brands such as Cartier, Montblanc, IWC, Dunhill, Van Cleef & Arpels and Piaget. Richemont chairman Johann Rupert for years downplayed the importance of Chloé to the group as its jewelry, watches and leather goods businesses went from strength to strength. Even after McCartney was appointed Chloé’s designer, Rupert said the company’s sales barely equalled those of one Cartier boutique.
But Toledano said Rupert never considered selling Chloé and that the group now more than ever recognizes the important role of creativity, in addition to marketing.
“Johann Rupert knows the fashion industry very, very, very well,” Toledano said. “I feel extremely well at Richemont because of the culture of the company. They respect individuals and they take a long-term view.”
And Rupert clearly is bullish on Chloé. Commenting on Richemont’s strong financial performance in the last fiscal year, Rupert said this summer: “Maybe it’s time to put our foot on the accelerator there; I’m looking forward to discussing future plans with the Chloé management.”
Asked if he felt alienated or conspicuous within the organization, Toledano retorted by saying he receives tremendous support from Richemont’s administrative and legal teams, plus its regional organizations. “It’s because we are different, all these people are very curious about what we’re doing,” he said. “We’re not just another watch company.”
Toledano acknowledged that many smaller European fashion brands have had a tough time in recent years. Chief among the challenges is a dwindling specialty store market which makes heavy investments in direct retail a must — an onerous undertaking for some firms.
However, he said the fundamentals for success — desirable products, creative and talented teams and rigorous management and logistics — are the same for megabrands or niche players.
“We have to stop saying it’s impossible for small companies to grow,” Toledano said. “The next big companies are the small ones.”