LVMH, JACOBS SIGN 7-YEAR DEAL

Byline: Miles Socha / Marc Jacobs / Robert Duffy

PARIS — “They’re cuckoo.”
That’s how Robert Duffy interpreted the reaction of LVMH Moet Hennessy Louis Vuitton executives in 1996 when he and partner Marc Jacobs dragged them to a parking garage on Mercer Street and explained that they wanted to build a boutique there selling $1,000 cashmere sweaters.
At the outset, the world’s biggest luxury group did not see eye to eye with a tiny fashion company that “did its accounting out of a shoebox,” as Yves Carcelle, head of LVMH’s fashion and leather goods division, described it.
Yet last Friday, when the partners renewed their five-year association for another seven years, until December 2008, they had many reasons to boast in unison. Under Jacobs’s leadership as artistic director at Louis Vuitton, the business has doubled from an estimated $1.2 billion in 1997 to more than $2.4 billion this year. Meanwhile, the Marc Jacobs brand, which generated revenues of scarcely $2 million in 1996 is on track to generate an estimated $50 million next year.
In exclusive interviews with WWD, Duffy, Jacobs and Carcelle spoke frankly about how teething pains have given way to mutual respect and constructive teamwork. And they evaluated the progress they’ve made, while vowing to continue building both the Vuitton and Marc Jacobs brands.
Under the new agreement, the operating company for the Marc Jacobs business has been streamlined. What had been two companies — Marc Jacobs International for the collection business and Marc Jacobs Inc. for the Marc by Marc Jacobs secondary line — have merged. The new entity, known simply as Marc Jacobs, is majority owned by LVMH, with Jacobs and Duffy each holding an unspecified minority stake.
Carcelle has been named chairman of the new operating company, while Duffy will be vice chairman, responsible for creative matters for all Marc Jacobs products as well as marketing and communications. The ownership of the Marc Jacobs trademarks remains the same, with LVMH, Duffy and Jacobs each holding a third.
“It’s a big commitment,” Duffy quipped, only hours after the signing ceremony and a celebratory lunch. “But it’s really worked out, everyone’s benefited and we want to continue the relationship. They really wanted us here and we really wanted to stay.”
That hasn’t always been the case. When Jacobs signed on as the first artistic director for Louis Vuitton in 1997, with plans to extend the brand into ready-to-wear and footwear, among other categories, Duffy acknowledged that, “We had a bumpy start.”
While getting Vuitton up and running, Duffy struggled with giving up the autonomy over decision making he enjoyed back at their tiny headquarters on Spring Street in New York. Many creative and strategic clashes emerged. And Duffy quickly became impatient with LVMH, which initially did little to build the Marc Jacobs side of the business.
“We were a very small company when we first got into it,” he said. “I don’t know if they believed Marc Jacobs would amount to anything.”
It was not until last year that the LVMH machinery shifted the Marc Jacobs trademark into gear, introducing a line of Marc Jacobs accessories, launching a fragrance under license with Parfums Givenchy, funding the first ad campaign and — most dramatically — introducing a diffusion line that caused an immediate sensation at retail.
“I was getting antsy,” Duffy recalled. “But I’ve learned to be patient and to do it the right way. I had felt that they didn’t really care about Marc Jacobs and only cared about Louis Vuitton and I was wrong. The timing had to be right for them and for us. Their insistence on doing it the right way has paid off. I’ve learned how to run a business from them.”
The business also is expanding on the design front. Separately on Friday, Duffy disclosed that Joseph Carter has been named senior designer for the Marc Jacobs women’s collection, effective today. Previously, Carter was senior designer for the Calvin Klein women’s collection. Also, Karl Aberg, formerly at John Varvatos, has joined the company as senior designer for the Marc Jacobs men’s collection.
Jacobs and Duffy have always taken an instinctive, seat-of-the-pants approach to the fashion business that would seem haphazard to a well-oiled, corporate behemoth like LVMH. For example, when Jacobs and Duffy were contemplating that first SoHo store, Duffy described the venture thus: “We’ll just fill some racks with clothes and open a store.”
But their “emotional” and energetic approach to the Marc Jacobs brand is something Vuitton management has learned to trust and benefit from. When Duffy suggested that Bleecker Street in Manhattan’s West Village would be a good place for a Marc Jacobs men’s wear store: “First Yves said, ‘What?’ and then he realized that he could trust us.”
Jacobs has proven at Louis Vuitton many times that his instincts are spot-on in taking the historic luggage brand into new style territory. Designs such as his Monogram Vernis patent leather accessories and the famous “graffiti” bags, a collaboration with New York designer Stephen Sprouse, have proved commercial successes. Carcelle said the graffiti bags sold out to the piece.
For his part, Jacobs said Carcelle and LVMH chairman Bernard Arnault have been extremely open to his suggestions. “Mr. Arnault is very excited by anything we propose that has the potential to be a commercial product, but has a creative edge,” he said.
For example, Jacobs’s proposal to sell a $25,000 Louis Vuitton charm bracelet this winter was greeted with enthusiasm, even though it was clearly a product that couldn’t be stacked high and sold like toasters. Instead, the designer saw it as an image builder and an expression of “poetry and sentimentality” consistent with the brand’s travel heritage. He still marvels that they made it to stores this month.
“For people who are bottom-line businessmen to do that is really impressive,” Jacobs said. “The fact that I’m getting Louis Vuitton to do nail polish is really something! But the reason we have the freedom is because we have shown success with the things we have done.”
While now an international fashion star, Jacobs has had a topsy-turvy career. Since setting up his own label in 1984 with Duffy, he struggled for years as a downtown, in-the-know designer. Duffy famously had to mortgage his house more than once to fund production. And while thrust to fame when he was signed as the designer of Perry Ellis in 1988, he was let go after the infamous “grunge” collection in 1992 and the collection line was scrapped.
But today, Jacobs has achieved a rare feat in an industry where many designers do double duty: Both his signature line and the one for which he consults are growing at a rapid clip. “That’s a very big difference between us and the rest,” Jacobs said.
In a separate interview on Friday, an elated Carcelle outlined the accomplishments of the partnership for both Vuitton and Marc Jacobs.
“Today, no one questions the credibility of women’s ready-to-wear or footwear from Vuitton, even though they never existed before,” Carcelle said. “Marc constantly comes to us with ideas that are no sacrilege to the Louis Vuitton brand. For example, the graffiti bags: It was not breaking a taboo or mistreating the heritage.”
Jacobs’s debut ready-to-wear collections for Vuitton were introduced in only seven Vuitton stores. Today, they are found in almost 50. And footwear is now available in more than 100 locations.
Asked if rtw was a loss-leading image vehicle, Carcelle replied: “Ready-to-wear contributes to the profitability of the company and attracts so many people to the brand and to the stores. And I don’t think we’ve lost one customer of Louis Vuitton while attracting so many new ones.”
Meanwhile, the Marc Jacobs brand continues to steam ahead. Carcelle said the designer’s signature fragrance is number one in some doors in Japan and it’s one of the hottest resources in many department stores there. He said he sees major growth potential in new markets in Asia, such as Hong Kong, Taiwan, Korea and China.
And there are more new Jacobs products ahead. The designer plans to introduce a signature men’s fragrance in fall 2002, and Duffy disclosed that he’s in discussions to introduce innerwear and underwear for men and women soon. Several licensing agreements are in the works, too, including ones for Marc by Marc Jacobs shoes and men’s wear, according to market sources.
Clearly proud of its achievement with the Jacobs business over the past few years, Carcelle issued an unprompted parting shot to his counterparts at luxury rival Gucci Group: “Let’s see if they can build Stella McCartney and Alexander McQueen as fast.”

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