Derek Lam Sells Stake to Labelux

Five years after launching his namesake business, Derek Lam is moving ahead with the help of a new financial partner.

NEW YORK — Five years after launching his namesake business, Derek Lam is moving ahead with the help of a new financial partner.

This story first appeared in the July 9, 2008 issue of WWD.  Subscribe Today.

Labelux Group, the Vienna-based luxury goods holding company that recently added Swiss shoe brand Bally International and London jewelry designer Solange Azagury-Partridge to its portfolio, has taken a majority stake in Derek Lam International LLC.

Terms of the deal were not disclosed, but the plan is to turn the label into a global luxury fashion brand, starting with the first freestanding Derek Lam retail store on Crosby Street here next year.

For Lam, the financial prowess of Labelux will offer a way to take his business to the next level. Labelux parent Joh. A. Benckiser SE is a family controlled financial holding company, and has subsidiaries in Vienna and Milan. The Benckiser family also owns the beauty giant Coty Inc.

“There were certain milestones we wanted to reach,” Lam said Tuesday, sitting at his Starrett-Lehigh Building headquarters with his business partner and chief executive officer, Jan-Hendrik Schlottmann. “We wanted to really make this a significant endeavor, and we came to the realization that to do that, you need a significant investment that was beyond what we have been doing for the first five years. After spending a lot of time with Berndt [Hauptkorn, ceo of Labelux] and Peter [Harf, ceo of Joh. A. Benckiser], and knowing Peter’s track record and his beliefs in how to build a luxury brand, we realized we shared the same beliefs and approach.”

Lam and Schlottmann, who founded their label, pursued global distribution since the early days.

The designer has been making his mark with luxurious, wearable clothes in recent seasons. Lam grew up in San Francisco and came to New York to study at Parsons School of Design. He worked at Michael Kors, designing for both the signature and bridge collections for eight years, and had a two year-stint for moderate-price retail chain G2000 in Hong Kong.

Since launching, Lam expanded into eyewear, which is licensed to Modo, and shoes and handbags, licensed to Tod’s. Lam is the creative director of Tod’s, and will continue in that role.

Lam and Schlottmann credited Domenico De Sole for introducing them to Labelux. The pair has been working closely with the former Gucci chief since winning a runner-up award at the CFDA/Vogue Fashion Fund in 2005, which included a mentorship program with de Sole.

“Domenico’s perspective, from the very beginning when he looked at our business plan, was that in order to get the brand to the next level, we need to have our own store,” Schlottmann said. “He continued to advise us [after the yearlong mentorship ended], and we actively started evaluating different proposals. He introduced us to Berndt and Labelux.”

Schlottmann added that he and Lam were immediately drawn to Labelux’s strategy of buying and building a brand. For Labelux, the main appeal to the label was Lam himself.

“He is great with his ready-to-wear, but also very experienced and talented in the area of shoes and bags,” Hauptkorn said. “These are prerequisites for a path of growth.”

Hauptkorn said there were several “pillars of growth” that were being considered.

“We want to maintain a high focus on product, and product quality,” he said. “We will not sacrifice the luxury position for both. When it comes to growing the brand, a retail presence is very important. It will not be the end of the strategy with the one retail store. We will also put Derek on the global map.”

Lam sells his namesake collection in 35 countries. While the brand has had its origins in the U.S., Lam has since brought his collections to upscale specialty stores worldwide, in markets that include Italy, the U.K., Japan, Russia and the Middle East. He sells at stores such as Barneys New York, Joyce in Hong Kong and 10 Corso Como in Milan.

“The brand is already very global in its presence if you look at its distribution,” Hauptkorn added. “We would look to further strengthen distribution in different markets.”

Hauptkorn said he expects the brand to “have a global retail presence, meaning a certain amount of stores, which will help really put the brand on the map; a good solid wholesale presence, a presence in various categories, most probably some selected licensing activities on top of that, but always with a high quality criteria.”

Lam plans to open his first, 3,700-square-foot boutique at 10-12 Crosby Street early next year. The unit is positioned adjacent to Jil Sander on Howard Street and near stores such as De Vera, Ted Muehling and BDDW. To create the store concept, Lam tapped Japanese architectural firm SANAA, which also designed such projects as The New Museum here; The Glass Pavilion at the Toledo Museum of Contemporary Art in Ohio, and the Christian Dior building on Tokyo’s Omotesando.

“I have always really loved their philosophy, in terms of what goes into their thought,” Lam said. “I found there was a great, similar point of view, and because this is our first store, I wanted architects who can really participate with me on developing that part of the brand.”

Ernst & Young and Duane Morris LLP represented Labelux in the deal, and Derek Lam was represented by Rothstein Kass and Rand Rosenzweig Radley & Gordon.

Hauptkorn said that Labelux doesn’t make acquisitions just to flip them later, but looks to build brands, supporting them and allowing them access to its resources. The company is continuing to look for acquisition opportunities, but Hauptkorn said, “We are privately held and don’t have stock market expectations. What we have are shareholders who believe in the industry as a long-term trajectory, who say, ‘We want to have a portfolio of promising fresh brands and brands with a strong heritage.'”

Labelux is “prepared to take a long-term view to really move the designer Derek Lam towards the brand Derek Lam,” Hauptkorn said. “We are there to make this happen for the next 50 years. We look at the big picture.”