Sonia Rykiel, the French fashion house known for its colorful striped knits, has gone into receivership as owner First Heritage Brands seeks a buyer to take over the struggling business.
A French commercial court on Tuesday placed the company into administration until June while it examines offers. First Heritage Brands had mandated investment bank Compagnie Financière Edmond de Rothschild in January to seek an investor or outright buyer for the brand, which it acquired in 2012.
A spokesman for Rykiel confirmed the court ruling, but declined further comment.
The label, which recently parted ways with creative director Julie de Libran, logged sales of 35 million euros in 2018, with a loss of 20 million euros, excluding its investment of 10 million euros in events marking the house’s 50th anniversary, according to sources with knowledge of the matter.
Prior to its acquisition, Rykiel posted revenues of 83.7 million euros in 2011, with a loss of 1.4 million euros, according to official company filings. The following year, the founding family sold an 80 percent stake to Fung Brands, an investment company backed by Hong Kong billionaires Victor and William Fung.
Now known as First Heritage Brands, the company headed by former LVMH Moët Hennessy Louis Vuitton executive Jean-Marc Loubier is also the holding firm for Belgian leather goods firm Delvaux and French shoe brand Robert Clergerie.
Though Rykiel’s sales were already declining at the time of the acquisition, the new owners hoped to turn around the business by capitalizing on its strong identity, anchored by founder Sonia Rykiel, who was dubbed the “Queen of Knits” by WWD.
After a false start under Canadian designer Geraldo da Conceicao, de Libran came on board in 2014. Having worked at brands including Louis Vuitton, Prada and Versace, she took the collections in a more upscale direction.
But her arrival coincided with a challenging period for the house, which was hit successively by the devaluation of the Russian ruble in 2014, which all but decimated business in its main export market, and the terrorist attacks in France in 2015, which dented its all-important domestic sales.
In 2016, the house shuttered its Sonia by Sonia Rykiel diffusion line and laid off a quarter of its staff as it moved to reposition the main Sonia Rykiel line with the introduction of lower price points.
At the time, its then-chief executive officer Eric Langon told WWD the company had registered continuous losses since 2013 and the new strategy was designed to return it to profitability by 2019. Langon was succeeded by Perry Oosting, who is also ceo of Clergerie, last August.
Oosting is said to have focused on renegotiating the house’s wholesale accounts with a focus on improving margins, but faced with a lack of return on its investment, First Heritage Brands decided to cut its losses and seek a buyer, with the aim of keeping the brand alive.
Sources said the company has had contacts with several interested parties, although Rykiel’s poor financial track record has made potential investors cautious. The Paris commercial court will now launch a public auction process in which existing and new offers will be examined.
While the company is still in talks with de Libran over the severance of her contract, originally scheduled to run until 2020, it is understood this process will not hamper the administration proceedings. De Libran was granted a 10 percent share in the company as part of her employment contract.
Having recently closed its stores in New York, London, Brussels and Luxembourg, Rykiel still has 10 freestanding stores, most of them in France, including its historic flagship on Boulevard Saint-Germain. The company counts around 200 points of sale worldwide, with partners including Lane Crawford and Net-a-porter.
In 2018, the brand ended a ready-to-wear license for the Japanese market, where the line was sold under the label Sonia Rykiel Collection. That market has now moved to a wholesale model.
Although the company made headlines with its outdoor fashion show last September, during which Paris Mayor Anne Hidalgo unveiled the newly christened Allée Sonia Rykiel, sources said the collection did not sell well, leading the label to skip the catwalk the following season in favor of a showroom presentation.
The fall collection was reduced by around 40 percent and re-centered on knitwear, as Rykiel sought to reach a younger customer via a push into online sales and a greater focus on digital communication.
The insolvency procedure is the latest setback for the Fung empire, which has a mixed track record with its European investments, which also included the Hardy Amies and Norman Hartnell brands in the U.K.
Hardy Amies, the couture house that once dressed Queen Elizabeth II and forged ties with royals and celebrities alike, in January went into administration, the U.K. equivalent of Chapter 11. Menzies, the administrators, said they were seeking a buyer for the U.K. operations and intellectual property rights.