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Yamamoto Rescued From Bankruptcy

Tokyo-based Integral Corp. will finance the fashion house’s restructuring efforts.

By and and
with contributions from Kaname Murakami

TOKYO — Yohji Yamamoto stopped just short of being fashion’s latest financial casualty.

Yohji Yamamoto Inc. filed for bankruptcy protection with the Tokyo District Court on Friday — but it has an investor lined up to restructure its troubled business. Japanese private equity fund Integral Corp. said it will finance the fashion house’s restructuring efforts and partner with the company for “long-term” success.

Yamamoto hastily organized a press conference Friday evening at the brand’s Aoyama flagship, just hours after the company filed for bankruptcy protection from its creditors.

“I’ve had my company for over 30 years, and I consider myself to be a designer first. I left many of the everyday business activities to others, but I think one reason that the company has come to this is that I left too much to others,” Yamamoto, dressed in a long black coat and sneakers, said. “I was told about the positive things, but many of the bad things didn’t reach my ears.”

Yamamoto said he plans to keep designing for the rest of his life, adding that his new backers appreciate the importance of maintaining his 28-year-old tradition of showing his collections in Paris.

“I will continue to show Japanese fashion on the level of the world stage,” he said.

The company’s brands include Yohji Yamamoto, Y’s and Y-3, a collaboration with Adidas. It also owns Limi Feu, a brand designed by Yamamoto’s daughter, Limi Yamamoto. Integral will form a special purpose company to acquire Yamamoto’s businesses, assets and subsidiaries. Once it has approval from the Tokyo District Court, the special purpose vehicle will become the new Yohji Yamamoto Inc. and the designer is expected to retain a minority stake in that firm.

The designer, who turned 66 last week, is known for his almost couturelike approach to sportswear and modern takes on traditional Japanese silhouettes. He developed a cult following since founding his own company in 1972, but failed to parlay his critical success and credibility within the fashion world into a strong business capable of surviving beyond the boom years of the Eighties and Nineties.

“The company has landed in this situation because of poor sales brought on by the tough economic climate of recent years, as well as by our overly ambitious approach to our international group companies and international operations,” said a visibly emotional Shohei Otsuka, Yohji Yamamoto Inc.’s chief executive officer.

The company has liabilities of about 6 billion yen, or about $68 million at current exchange, Otsuka said. Annual sales peaked in 1999 at around 12 billion yen, or about $109 million at average exchange for that year, but have steadily declined since then to about 7.5 billion yen, or about $80 million, for the year ended Aug. 31.

Earlier this year, there were signs of financial strain chez Yohji. In the spring, the company pulled the plug on its four-year-old diffusion brand Y’s Red Label, which showed in Tokyo. A few months later, the house canceled its men’s fashion show in Paris and chose to hold showroom appointments. Speculation about the poor financial health of the company intensified over the past few weeks.

At the press conference, Integral executives said Otsuka will retain his role as ceo. Integral will tap Yoshihiro Hemmi as chairman of Yohji Yamamoto Inc.’s board. Hemmi formerly was vice president at Adidas Japan, where he worked on the Y-3 brand, and ceo of Japanese confectionery company Tohato.

“There are many brands in the world, but I am really excited about Yohji Yamamoto because it is a brand that can bring clothing from Japan to the world,” Hemmi said. “I want to help make it a strong brand worldwide.”

Hemmi and Integral executives did not release many details on their business plan for the house, but they did specify the need to trim the retail network. Reijiro Yamamoto, Integral’s representative director and partner, said they plan to close 20 to 30 stores over the coming years. Yohji Yamamoto has 102 stores worldwide, about 60 of which are in Japan.

Although few question Yamamoto’s talent, some industry observers accuse him of staying entrenched in his old ways and not adapting to a rapidly changing marketplace.

“We are living in another world which is quite different from the 1980s,” said one Tokyo-based fashion executive aware of Yamamoto’s financial struggles. “We all have to find the new way in this decade — how to put out [the right] merchandise, how to promote brands, how to care and sell to the customers.”

Robert Burke, president and ceo of New York-based consultancy Robert Burke Associates, noted Yamamoto always catered to an “intellectual customer,” but those shoppers have a lot of other options in the marketplace.

“The competition has never been as fierce at the designer level. People are positioning their brands, merchandising them and addressing their customer base more than ever before,” he said, adding the Japanese designer did not make significant inroads in lucrative categories such as handbags, shoes and fragrance.

That said, the designer did ink a string of deals to broaden his reach and product offerings. These partnerships include one with Mandarina Duck for luggage and travel bags and another with Samsonite for Y-3’s accessories. He also has designed shoes with Salvatore Ferragamo and jewelry with pearl specialist Mikimoto.

Established in 2007, Integral is a private equity fund targeting “long-term” investments in the Japanese market. Its current portfolio includes an investment in machinery company Business Process Solution. Integral is backed by GCV Savvian Group Corp., which has offices in Tokyo, several U.S. cities and London.