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This story first appeared in the March 1, 2005 issue of WWD.  Subscribe Today.

PARIS — Nicolas Ghesquière, one of the most influential designers of his generation, has been asked to experiment with something new at Balenciaga: profits.

And he says he’s more than up to the challenge of meeting the 2007 breakeven deadline imposed by Balenciaga’s parent, Gucci Group. In fact, he wants to get there sooner, by the time his employment contract expires in July 2006.

“This is realistic and I’m not the only one to believe it now,” Ghesquière said in an exclusive interview. “The mood of the house is very positive. People are very encouraged by what’s happening inside.

“Even if we’re not a priority in the group — and [it’s] clear we’re considered a small brand — I still want to prove that we can be bigger than that. That’s my challenge for the next year and a half.”

During a frank conversation at Balenciaga’s 17th century studios on the Rue du Cherche-Midi here, Ghesquière proved he’s as comfortable talking about the bottom line as balloon-shaped hemlines. He mapped out a breakeven strategy based on:

  • Building on Balenciaga’s current momentum at wholesale. Spring-summer 2005 orders zoomed 80 percent versus a year ago. Pre-fall collection orders were up 120 percent.

  • Introducing more “accessible” products, like the new greatest-hits collection of pants and knits he did for pre-fall.
  • Focusing on fast-growing markets like Japan, where the business has tripled in two years.
  • Regaining control of the fragrance business once the current license expires with Jacques Bogart Group at the end of 2005.
  • Keeping a tight rein on spending. “We have to squeeze,” Ghesquière said, referring to budgets, not his strict silhouettes.

Ghesquière also disclosed he is “not at all” opposed to licensing — often a dirty word in luxury circles, and certainly during the era of Tom Ford and Domenico De Sole at Gucci Group. “If we find a good partner who believes in Balenciaga — yes, why not,” he said. “I’ve already made a few contacts.”

He declined to elaborate, but later allowed that classic men’s suits and trousers could be a category ripe for a partnership.

Emblematic of his desire to improve the business and extend the brand’s reach are the cheaper pants and knits, unveiled to buyers here last January. Ghesquière reinterpreted best-selling styles from the past at prices about 30 percent less at retail: $345 to $520 for pants, and $335 to $450 for knits.

“That was my idea,” he stressed. “It’s not a marketing strategy, and it’s not coming from someone else. You don’t sign on with these kinds of groups if you don’t want to do business and make money. I like to experiment, but I also like to make beautiful, wearable clothes. I always mix them.”

He said he plans to expand such capsule collections to classifications like silk and leather, allowing more “access points” for the brand and the chance for Balenciaga devotees to build a wardrobe.

“What is really interesting about being a designer today is that you can occupy those two positions: being a forward thinker and at the same time someone who sells clothes,” Ghesquière explained. “In Europe a few years ago, you had to make a choice.”

And he said his decision last year to introduce select archival items, reinterpreted for modern times, helped the powers-that-be at Gucci, and the industry at large, better understand the link between the house’s rich heritage and the experimental collections Ghesquière turns out. It also gave customers a new “access point” to the brand, via eveningwear, since many of the items Ghesquière selected are dressy.

“My big challenge now is to make Balenciaga become a brand, and give that feeling that we can feed the stores like a brand.”

Dressed in a gray flannel blazer and a crisp shirt as gleamingly white as his new leather sneakers, Ghesquière spoke in an animated fashion about the future of Balenciaga — and readily acknowledged relations with Gucci Group were strained in 2004, almost to the breaking point.

The designer was said to have gotten off on the wrong foot with Robert Polet when the former Unilever frozen foods honcho was named chief executive officer of Gucci Group last July. Last fall, speculation was mounting that Gucci might sell the house, or turf Ghesquière in favor of a designer who might be easier to manage. Seizing a possible opportunity, luxury rival LVMH Moët Hennessy Louis Vuitton swooped in and approached Ghesquière about its longstanding vacancy at Givenchy, according to Paris sources.

During the interview, Ghesquière didn’t flinch when such scenarios were mentioned. And he’s aware of his reputation for being uncompromising, stubborn — even difficult. Still, he steered the conversation back to the positives, such as the rocketing sales and improving financial picture, and credited them for improving relations dramatically.

For example, he noted that sales at Balenciaga’s flagships in New York and Paris have increased 138 percent and 56 percent, respectively, since they opened in 2003 — and both were profitable last year, ahead of schedule.

A change in Ghesquière’s attitude also seems to have worked wonders in soothing over prickly relations with the head office.

“I used to be more defensive and less comfortable because I was feeling threatened, but I’m not any more. I feel more comfortable with the process,” he said, referring to life under a conglomerate. “My position before was to build a strategy that fit the house and my way of working. That’s why I had to be a little authoritarian.”

Retailers confirm the Balenciaga business picture is improving rapidly.

“This is the story of a company that really looked at its problems and found a solution,” said Julie Gilhart, vice president and fashion director at Barneys New York. “Everything is good now. We’ve grown our business so incredibly.”

Evelyn Gorman, owner of Mix in Houston, said Balenciaga handbags are “difficult to keep in stock” and she has been flooded with calls from customers asking to reserve rtw items from Balenciaga’s hit spring-summer collection, which crossed classic marine style with a Space Age sensibility.

Much of the tension in recent years between Ghesquière and his Gucci Group executives relate to production issues. In brief, Ghesquière wanted to maintain extensive ateliers in Paris — his fashion “laboratory” — and build a “bridge” to the Italian factories designated by the group as a platform for its emerging brands: Balenciaga, Alexander McQueen and Stella McCartney.

To that end, Ghesquière set up a product development team in Paris to have more control over his collections, maintain exclusivity and keep a tight grip on quality. That meant Balenciaga had fixed expenses higher than most other brands in the group, Ghesquière acknowledged, describing the integration process as “difficult and painful.”

What’s more, the arrangement had glitches, and Ghesquière acknowledged serious delivery and fit problems hurt the business, particularly with his influential spring 2003 “scuba” collection only an eel could squeeze into. “It was a very difficult season,” he acknowledged. “We were penalized.”

He also acknowledged that a narrow price spectrum, focused at the upper ranges of designer rtw, also had a negative impact. “We had to give an accessible price point,” he said. To wit: the spring collection currently in stores even has T-shirts for 115 euros, or about $150 at current exchange.

Balenciaga’s impressive Rue de Cassette showrooms, approved during the go-go De Sole days, also came back to haunt Ghesquière. The cost of operating it, plus his product development team, did not sit well with the new suits at Gucci Group, which nixed Balenciaga’s budget for advertising and — for a few weeks, at least — its fashion show last fall.

“I knew my priority was to have this team to develop the collection,” Ghesquière said. Ultimately, he convinced his corporate parent to reverse the decision about the show, allowing him to invite 250 people to the Rue de Cassette space last October to unveil one of the strongest shows of the season. “I don’t mind doing small shows. I think it’s very chic and I like to show inside the house,” he added.

Ghesquière described as “very good” his relations with Polet and new PPR chief executive François-Henri Pinault, who officially succeeds Serge Weinberg later this month.

Not that everything is hunky dory. For one, Ghesquière takes sharp exception to being lumped into Gucci’s “emerging brands” category. “It doesn’t help to be considered an emerging brand. I’m fighting that. I don’t think a house with 70 years of history can be considered an emerging brand. It’s not Nicolas Ghesquière; it’s Balenciaga,” he said firmly. “I think they are starting to understand that now.”

Ghesquière also said he is not happy that Balenciaga is the only fashion house in Gucci Group without a chief executive of its own. That’s been the case since Pascal Perrier, named Balenciaga’s ceo in 2001, was named director of licensing development at Gucci Group in October 2003.

The designer acknowledged the search for a ceo was interrupted by executive turbulence at the group level — the exits of De Sole and Ford and the arrival of Polet — but assured it will resume. “I hope to have someone soon,” he said. “We miss not having a ceo for sure.”

As for his own employment contract with Gucci Group, negotiations to renew it have not yet commenced, and Ghesquière, who owns a 9 percent stake in the house, said anything is possible. “I want to stay, but it depends what are the plans for the house, too,” he said. “I’ve very attached to the house and I want to make it a success.”

Looking ahead, Ghesquière said he wouldn’t rule out a couture collection for Balenciaga, or even a signature label.

“For the moment, I feel very good with ready-to-wear. It’s very elaborate and I’m using more and more couture techniques,” he said, noting that he works with Lesage for embroideries, Lemarie for feathered pieces and Robert Goosens for jewelry. “It’s my way to work with couture,” he said.

He also reiterated that he would some day like to launch a Nicolas Ghesquière brand.

“It’s one of my dreams. I would love to do my own line. I don’t know when and I don’t know how, but I would like to do it. And today I would say it would be in addition to Balenciaga,” he said. “Balenciaga is part of my identity. If I want to start my own line, I have to find a very specific and special concept. We are far from this.”

For now, his priority is ensuring that Balenciaga continues to fire on all cylinders, including the vital leather goods category.

Balenciaga continues to enjoy strong sell-through of its iconic “lariat” bag with braided handles and dangling zipper pulls, which now comes in satin versions for evening and in a $15,000 crocodile version for luxury addicts. Handbags now represent about 30 to 35 percent of brand sales, and Ghesquière said building the momentum is a priority. “I’m very happy to do a bigger bag collection and a bigger shoe collection,” he said. “The shoes are doing very well.”

Men’s wear, which had been held back by poor sizing and high pricing since its launch in 2002, also reached a “turning point” this past fall season, according to Ghesquière. However, it accounts for only 7 percent of rtw sales.

The designer is also eager to revamp Balenciaga’s fragrance business and is already in discussions with YSL Beauté, Gucci Group’s beauty arm, about transferring the license to it, or possibly elsewhere.

“I want to rebuild the legacy of perfume,” Ghesquière said, noting that scents like Le Dix were in the same league as Chanel No. 5 in the Fifties and Sixties. “This is an access to the brand, too. The name is good for perfume.”

And a hit fragrance could just be the ticket to renew investments in the brand. When it acquired Balenciaga back in 2001 as part of an acquisitions spree, Gucci said it planned to quickly open Balenciaga flagships in London, Milan and Tokyo. Of course, none of that came to pass.

“Once we’re going to break even, we may open new stores again. I can hardly wait for that,” Ghesquière enthused, noting that the U.S. would likely be the priority. “Once we get to [profitability], I think it’s going to be a different life.”

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