Marc’s Long-Term Deal: Jacobs Signs New 10-Year Contract

Marc Jacobs and Robert Duffy signed new employment contracts Monday that will keep them with LVMH for the next decade.

Marc Jacobs and Robert Duffy

NEW YORK — Marc Jacobs and Louis Vuitton are planning to stick together for the next decade.

This story first appeared in the May 11, 2004 issue of WWD.  Subscribe Today.

The designer and Robert Duffy, who founded Marc Jacobs International together with a simple handshake 20 years ago, signed new employment contracts on Monday that will keep them at LVMH Moët Hennessey Louis Vuitton for 10 more years, concluding 11 months of arduous negotiations that at some points threatened to bring their relationship to an end.

Under terms of the deal, LVMH Jacobs’ business, including, in the short term, store openings in Los Angeles, Boston, New York, Paris, London and Chicago. The goal of both parties is now to grow Marc Jacobs into a global fashion force.

Although it was their unhappiness with the level of investment LVMH was making into the Marc Jacobs brand in recent years that drove the designer and his business partner to challenge the conglomerate with the possibility that Jacobs could be persuaded to work someplace else, Jacobs and Duffy said during an interview in the New York offices of Marc Jacobs after signing the deal that their loyalty to LVMH was never really in question. They noted that it was LVMH chairman Bernard Arnault who came to their rescue in 1997, when Duffy had to mortgage his home to keep the business afloat.

Jacobs is by no means a nostalgic designer, yet even he was moved by the emotional significance of the timing of the contract renewal. He and Duffy were preparing to attend a benefit dinner and graduate fashion show Monday night for Parsons School of Design, where they would be honored for their accomplishments. It was at the Parsons show in 1984, when Jacobs was a senior, that Duffy approached him with the proposal for a partnership, founded as Jacobs Duffy Designs Inc.

“It’s a very hard thing for me to articulate,” Jacobs said. “I always said that the most important thing is the time we’re in. I don’t want to shut the door on the past, but it’s where we are now that matters, and we are in our time. There are good days and there are bad days, it’s just that this day is 20 years.”

Renewing their relationship with LVMH means that one of the most successful examples of a contemporary designer reviving a dusty fashion house — in this case once only known by its LV monogram — will have the opportunity to outlast the novelty factor of such an association, rather than end in another fashion war. To Jacobs, the renewed commitment signifies an acknowledgement by the conglomerate of what many competing luxury firms already had acknowledged is his rare ability to successfully design for a European house while maintaining a rabid interest in his signature label at the same time. Still, in his pragmatic manner, the 41-year-old designer said, “You can always get somebody else to do my job, no big deal. It can either be better, or worse, or different — that’s all the possibilities there are.”

“I never had this attitude that everything was my idea,” Jacobs said. “I don’t mean that in a self-deprecating way. I’m realistic. I’m not a controlling or director-like person. I’m good at participating in a group. I’m good at making things and I love working with Vuitton, but at a certain point, I got tired of this image of us with a tin cup in our hands, saying, ‘Please sir, can I have some more?’ That whole Oliver Twist routine was getting so tired.”

Among the highlights of the new contracts are salary increases for Duffy, 50, who is president of Marc Jacobs, and Jacobs, as artistic director of the Marc Jacobs and Louis Vuitton brands; commitments from LVMH to support the growth of the Jacobs brand with several new stores over the coming years; Arnault’s personal involvement in accelerating its business plans, and the right of refusal by Jacobs or Duffy in naming executives to the company, such as the position of chief executive officer — vacant since the departure of LVMH’s last appointment, Jeffry M. Aronsson, who moved to Donna Karan in December.

In another significant development, Bertrand Stalla Bourdillon, a general director of LVMH Fashion Group who has long been seen as sympathetic to Jacobs’ cause within the LVMH upper management, has been named chairman of Marc Jacobs in addition to his existing roles at other LVMH fashion brands, Duffy said.

“I am very happy about all of this,” Jacobs said. “There once was a time when all I wanted was a pat on the back, but I think this was a demonstrative way to show that they do believe in what we’ve done, like putting their money where their mouth is, to be cliché about it. If we didn’t reach something that we all felt happy with, I don’t think this would be the case.”

“LVMH rose to the occasion and said, ‘We do believe in you,’” he continued. “We do have a loyalty to them. We’d like to be with the people who saved our ass, despite all the things that once went wrong. We do remember when we were in another place.”

Since the contract negotiations began last June, the new deal now extends the executives’ employment until 2013 and replaces a seven-year agreement that was struck in 2001. LVMH has been under pressure by investors to shore up its contract agreements with star designers at its various fashion brands in response to the rush of bad press that followed the departure of Tom Ford and Domenico De Sole at rival conglomerate Gucci Group. LVMH executives were clearly relieved that Jacobs will remain with the company, following his public remarks chastising the group for its lack of support in an article that appeared in the Wall Street Journal on the day of his fall fashion show and the day before LVMH opened its biggest Louis Vuitton flagship on Fifth Avenue.

“At a moment when there are so many changes in the industry, it’s nice to see some continuity,” said Yves Carcelle, ceo of Louis Vuitton, who said in a phone interview that LVMH will invest a “significant” amount of money in the development of Jacobs’ business. Among the projects that were given the LVMH green light during negotiations are new stores in Europe and the U.S., including an additional Manhattan flagship to be located on Madison Avenue.

“It’s a fast-growing company and we all think it’s time to invest more,” Carcelle said, noting the Jacobs brand is on track to break 100 million euros or $118.3 million at current exchange, in wholesale volume this year, turning a profit after a “near break-even” 2003. Sources close to Jacobs said that, with its secondary line, accessories and fragrance license, Marc Jacobs products generate close to $300 million in worldwide sales at retail.

Carcelle said the leases LVMH recently signed for a cluster of Marc Jacobs stores in Los Angeles are indicative of the French firm’s commitment to develop a brand with a powerful image, but that still has a relatively small commercial presence. He added that “we have more to do in Europe” as well as in Japan, South Korea, Taiwan and China.

“On our side, both Bernard Arnault and myself are delighted about this agreement,” Carcelle said.

As for Jacobs’ role at Louis Vuitton, Carcelle described the designer as “the perfect match” for a brand that this year is celebrating its 150th birthday.

“He understands completely the culture of the company,” he said.

At times, Duffy and Jacobs expressed perplexity with the LVMH negotiating process, but each came away with a newfound respect for their French partners and with Jacobs grasping for the right word to describe the happiness he felt over LVMH’s agreement to invest in his brand.

Over the course of their seven-year history, LVMH has acquired parts of Marc Jacobs’ holding company that now total 96 percent ownership, although Jacobs and Duffy retain a two-thirds interest in the Marc Jacobs trademarks, meaning they are paid royalties in addition to their personal salaries. Because LVMH owned the company, however, Duffy felt that there was little incentive for Arnault to allocate the conglomerate’s resources to the development of Marc Jacobs over any of his other properties, such as “star” brands like Christian Dior and Louis Vuitton.

Convincing Arnault of the long-term potential of Marc Jacobs was the greatest stumbling block to their negotiations, Duffy said.

“We want Marc Jacobs to become a global force,” Duffy said. “Now we are a nice, midsized American company, but I really want it to be a global powerhouse. The only way I can do that is if I have the support of Mr. Arnault.”

With that endorsement in place, Jacobs and Duffy do not intend to pursue any extravagant paths to new growth, but will focus on expanding its network of company-owned stores. The company’s first Boston store is scheduled to open in two months on Newbury Street in a 4,000-square-foot space, followed by the opening of the Los Angeles locations in October. There, the company is renovating four separate buildings on Melrose Avenue and its tributary, Melrose Place, to open a collection store, a Marc by Marc Jacobs store, a VIP studio and management offices.

The West Coast Marc by Marc Jacobs store will be the largest for the designer’s four-year-old secondary label to date, and is expected to carry the broadest array of products, including new home products being designed to complement the collection’s home products that were launched in New York and San Francisco stores in December.

Jacobs and Duffy also have backed away in recent weeks from their concept of introducing a third label at even lower prices, saying they would now like to incorporate more accessible items within the Marc by Marc Jacobs line, where price points generally coincide with those of the classic bridge market. With designers such as Calvin Klein, Ralph Lauren and Michael Kors introducing even less expensive lines at retail this year, Jacobs is facing increasing competition in the designer-at-a-price market he helped to reinvigorate with the introduction of Marc by Marc, and more likely to step up to the plate by increasing the range of that collection.

“The way I think about it is that we are in our time now,” Jacobs said. “We didn’t ever have to adjust or change to find our audience. Things just sort of fit into place. I’d like to expand on that. I hate to talk about things as products, as if I’m detached from all that, even though the staff is much bigger now than it ever was and we now have the ability to do so much more than we ever have before.”

With more than 150 employees in its New York offices, the changes are sometimes overwhelming to Jacobs, although he and Duffy pointed out that several employees have been there since the beginning and will probably be around for the next 10 years, which for once will be as much about Marc Jacobs as it is about Louis Vuitton.

“That’s the one thing that kept me smiling throughout this whole negotiation,” Jacobs said. “That we were the first people who did Louis Vuitton. No matter what happened, no matter if they replaced me with someone better, that’s something that no one could ever take away.”