A new day is dawning at Proenza Schouler.
Designers Jack McCollough and Lazaro Hernandez brought in new backers, more money and turnaround-savvy management — renewing hopes that the commercial side of the business will finally live up to the brand’s critical acclaim.
The company said the designers teamed with an undisclosed group of private investors to buy back their company “in its entirety.” This confirms a Nov. 2 report in WWD that the fashion brand was headed for a change in its investor base.
Proenza Schouler also said “a significant round of fresh capital has been raised during this process for the purposes of investing in the company’s growth and developmental strategies.”
That money will be used to “enable the brand to expand globally by focusing on its core businesses of luxury ready-to-wear, leather goods and [the casual line] PSWL, as well as continuing to support its existing licensing partners L’Oréal Luxe and Onward Luxury Group SpA.”
The designers declined to comment beyond the statement. Investment banker William Susman, who is a managing director at Threadstone and advised Proenza on the deal, also declined to comment.
Leading the business side of the company’s charge into the future will be turnaround specialist Kay Hong, who was named chief executive officer.
Previously, she was ceo of plus-size retailer Torrid Inc. Before that, she spent more than 12 years at Alvarez & Marsal, where she stepped into top spots at Talbots and gift company Harry & David. While those brands make up something of an unusual pedigree to become ceo of a high-fashion company, Proenza Schouler could clearly use a revamp on the business side.
Hong lauded the designers and said she was intent on helping to create “an exciting new era at Proenza Schouler.”
She will be backed up by chief operating officer Mary Wang, who was previously executive vice president at Alexander Wang and, before that, spent 20 years at Donna Karan, where she had a long run as president of DKNY. Jonathan Friedman, who has been consulting with the firm, was named interim chief financial officer.
They take over from ceo Judd Crane and cfo John Paolicelli, who left the firm Monday.
In a joint statement, McCollough and Hernandez said: “We are thrilled to embark on this new, very exciting chapter of Proenza Schouler and are delighted about the team of industry leaders we have assembled who, together with us, will help drive the business to its full potential. We couldn’t be happier to have Kay, Mary and Jon by our side and to once again have full authority over our company’s destiny.”
This is the fourth time the designers, who started the company in 2002, have brought in new investors.
Valentino Fashion Group took a 45 percent stake in the brand in 2007 for an estimated $3.7 million. At the time, McCollough and Hernandez were among the buzziest of designers in the industry and seen as potentially stepping into a design role at Valentino.
But a group of backers led by John Howard, ceo of Irving Place Capital, and Andrew Rosen, ceo of Theory (who both had personal stakes in the business) bought most of Valentino’s position in 2011. They were said to put in $10 million to $20 million and assumed debt in exchange for a stake that was equal to that held by the company’s management.
That bet was a tough one, though, and private equity firm Castanea took a minority stake in 2015 that pumped more money into the business, but diluted other shareholders. Ron Frasch, an operating partner at Castanea Partners and former president and chief merchant at Saks Fifth Avenue, led that investment and served for a time as interim ceo at the company.
From the Valentino investment, to Rosen and Howard and then Frasch — Proenza Schouler has had high-profile backers with the connections, money, expertise and motivation to power the business. But the design duo has continued to fail to turn their design aesthetic into mega bucks.
“If that team [of investors] couldn’t do it, I’m not sure what the new buyers are going to add,” said one financial source, who requested anonymity.
Castanea, Howard and Rosen are all said to have exited their positions in the company.
“They needed some new capital put into the business,” said one source, pegging the investment at more than $10 million. “This is a good deal for the designers. It allows them to start fresh.”
The identity of the “group of private investors” could not immediately be learned; however, it is understood it is actually a single financial entity not well-known in fashion, beauty or retail circles and without any investments “of this stature” in the sectors.
The change of management suggests the designers and their partners wish to let go of the “legacy thinking” that might have been holding the business back, the source said, while characterizing the new operating officer, Wang, as a “real industry veteran with real know-how” who had already done some strategic consulting at Proenza.
Among the most promising growth avenues seen for the designers is the more accessibly priced second line introduced last year, PSWL, now shipping to a broader range of customers for pre-spring.
Each new investor has bought into Proenza Schouler with an eye toward cashing in on the aesthetic and talent that saw the designers rack up five CFDA Fashion Awards, including the prize for Womenswear Designer of the Year three times.
In 2015, when asked by WWD if the goal was to build a $1 billion brand, Hernandez said, “Our partners and investors want us to keep growing and growing and growing. It’s the way people run businesses today. You don’t plateau — ever.”
At the time, the designers claimed they did fret about having a minority ownership situation, but stressed the importance of keeping creative control. “I think most of [our investors] realized that if they let us do what we do, they’re going to have a return,” Hernandez said. “The wrong thing for them to do would be to clip our wings.”
Now the designers hope that another fresh start with a new investor and management will at last enable them to soar and more.