NEW YORK — Designers and brand owners must prioritize commercial, salable products over media glory.
That’s among the chief lessons to be learned from Tuesday’s news that Procter & Gamble plans to shutter the Rochas fashion house despite widespread acclaim for its designer, Olivier Theyskens, say observers.
The move also underscores the increasing challenges for a luxury fashion label that hasn’t been able to diversify into other product categories successfully.
In the past few seasons, Theyskens had emerged as a star of the global fashion scene for turning Rochas into a label that was highly revered by the fashion community. He garnered much press, won several fashion awards and, by many retail accounts, has been able to develop a creative and somewhat salable collection, albeit a very expensive one.
But all the talent in the world no longer seems to suffice. In today’s industry, which is increasingly being helmed by conglomerates that must report to shareholders and private equity funds, creativity — Theysken’s kind that makes fashion insiders swoon — is no insurance policy.
“It means that talent is not enough,” said Jean Jacques Picart, a Paris-based industry consultant. “Obviously, Olivier is a very talented designer. But we must not forget our job is commerce. We need to go back to the product, back to the trade.” He suggested that brand owners seeking to rejuvenate old names often “pay too much attention to the media to revive and not enough to the business side.”
A spokeswoman for P&G said Wednesday, “It’s not our core competency. We’re not a fashion company. We’re very grateful to him [Theyskens]. He’s done an amazing job at Rochas, but our core competency lies elsewhere. Running a fashion business in terms of the distribution chain requires specific skills. We looked at creative solutions and did everything we possibly could. We had to make tough choices.”
Indeed, many executives concurred that P&G’s decision to dismantle Rochas’ apparel business is a prime example of how editorial buzz doesn’t translate into financial viability.
The Rochas situation is also a signal of how much the fashion business has changed over the last few years, raising questions of what a brand needs to become successful at retail.
“The business model as it has been for the last number of years makes it increasingly difficult, if not impossible, to be successful with just a very high-end ready-to-wear line,” said Robert Burke, founder of luxury consulting group Robert Burke Associates. “Without the revenues of licenses of other categories, a collection business alone is almost impossible. More people are able to carry a Balenciaga or Marc Jacobs bag than are able to buy and afford the collection. Unfortunately, Rochas didn’t have the diversification of merchandise that it obviously needed.”
Cedric Charbit, general merchandise manager at Printemps in Paris, noted, “Sure, it’s a shame, but at the end of the day, everyone needs to make money and some projects are not economically viable. Fashion is about supply and demand.
“In fashion you can have a lot of buzz, but it sells or it doesn’t,” Charbit added. “[Rochas] had no advertising, it had no accessories, no hit bag and the clothing was difficult. Theyskens has talent, but he wasn’t focused. [Balenciaga’s] Nicolas Ghesquière has had commercial pressure put on him and that’s proved that it can create energy when done in the right way.”
“Buzz is not what makes a business succeed,” said David Wolfe, creative director of The Doneger Group, the New York-based buying office and trend forecaster. “Often, media buzz is only about the media and not necessarily about the business of moving merchandise or running a business. Olivier is a great interview, he is very photogenic, and the clothes made great pictures, but they were artistic and fashion is a very commercial art.”
By all accounts, Rochas has seen increases at retail. Barneys New York has experienced double-digit gains every season with Rochas, according to Julie Gilhart, senior vice president and fashion director. “We loved Rochas and how it was developing,” she said. “Everything about it was great — Olivier, his team, the clothes. The bags and shoes were beginning to develop. It is really hard to understand why it had to stop this way.
“I think the thing to learn from all this is it is really about the designers and their talent first and foremost. Olivier’s collections at Rochas were not only beautiful but intelligent and directional. His eye for business is the same. His influence on fashion has been mammoth.”
Jeffrey Kalinsky, owner of Jeffrey, also raved about Theyskens’ ability. “Olivier Theyskens is one of the five most talented designers working in fashion today. He is just an amazing talent. It’s sort of heartbreaking that the Rochas clothing he was creating won’t be available anymore. He really created something from a blank canvas. He combined all of my favorite elements — substance, refinement and elegance.”
However, some retailers said the customers balked at the expensive prices.
Joan Burstein, owner of Browns in London, said high pricing was an Achilles’ heel, which is why she no longer carries the brand. “The customer is very aware of prices, and obviously the arithmetic didn’t work out,” she said. “The pieces were beautiful, you could turn the garment inside out and the pieces were hand-done, but sometimes it did not justify the prices. Up against the other designers, Rochas was too expensive.”
The news made some wonder whether a conglomerate the size of P&G didn’t have the finesse to handle a house so deeply rooted in French fashion, and it begs the question of just how healthy selling out to a corporate parent can be. “Corporate couture is an oxymoron,” Doneger’s Wolfe quipped.
But even if the wan, longhaired likes of Theyskens are rare in the halls of P&G headquarters in Cincinnati, others suggested the shutdown was premature.
“I think he did a great job there,” said Karl Lagerfeld, who counts Theyskens as a personal friend and a frequent guest at his Chanel shows. “He did a lot to create an image they didn’t know how to use properly.”
Lagerfeld stressed that there are few stars in the industry and that management has a responsibility to translate the work of a designer into a success.
“It’s too easy to say it didn’t sell,” he said. “Ask first, how was it sold?” Lagerfeld stressed that making a fashion brand work in today’s competitive environment requires investments and expertise in stores, advertising, merchandising and production. “You can’t say it’s Olivier’s fault,” he said. “To me, even if it does sell, there may be other problems with the management.”
Valerie Steele, director of The Museum at FIT, noted, “Fashion takes a particular type of expertise and a long-term commitment that is hard to find in today’s marketplace. It doesn’t follow normal rules of capitalism. It seems much more erratic. There is an important role of gatekeeping in fashion, but in this particular case, all the gatekeepers were rooting for him and it still didn’t work. You couldn’t have hoped to find a better designer.
“Fashion does not follow the same rules as other types of merchandise, and that makes big investors and companies worried,” added Steele. “It may seem undesirable or too much trouble. It’s prestigious, sure, but it needs a lot of care and feeding. It’s more demanding and less reliable than predictable commodities.
“There is always a lot of talk about reviving famous couture houses,” Steele continued. “There should be a lot of capital invested in their names, and yet very few do it successfully. In today’s market, you have to be a really big brand. In the Twenties or Thirties you could start a couture company with just two or three clients, but now you need a lot of money and time, and there is an element of just luck. Very few of these succeed. If you think back to 1987, Lacroix. The economy tanked and the perfume was not working. It took time.”
Carla Sozzani, owner of the 10 Corso Como boutique in Milan, said, “I understand that Rochas is a niche brand that was probably losing money, but I still think P&G could have waited longer before deciding to close it down.
“You need to give these brands more time: Just think of how long it took Balenciaga to be turned around. Olivier is very talented and has an eye for quality that few young designers have,” Sozzani continued. “Over the last two seasons, his clothes have matured and evolved very much. In the pre-spring collection, for example, there were lots of wearable and easy pieces that the retailers lauded.”
Meanwhile, news of the Rochas fashion closure, reported first by wwd.com on Wednesday, is likely to prompt a fresh round of new suitors for Rochas.
Although P&G had reportedly sought to license the rtw business, sources said the consumer products giant could entertain enticing offers for an outright sale of the fashion and fragrance brands together.
Rochas fragrances — which include such scents as Poupee, Alchimie and Lui — generate annual revenues of $44 million a year at retail, according to analyst estimates. Other estimates range as high as $50 million to $75 million. The perfume business, while centered in France and Spain, is said to be healthy and profitable.
P&G declined to disclose figures for the fashion house, but sources estimate revenues of less than $12.6 million and suggested the business was losing money, given high labor costs in France and the big-budget runway shows Theyskens mounted each season in a tent in the Tuileries gardens. One source suggested annual losses could have been as high as sales, noting: “Procter & Gamble wouldn’t shut down a company because it lost $2 million or $3 million a year.”
To be sure, it’s another signal that conglomerates are sharpening their focus and whittling out distractions. Paco Rabanne, owned by Spain’s Puig Group, has ceased rtw shipments as it seeks to close down its high-cost Paris operations, which employ some 40 people. Rabanne is said to be considering several options, including a manufacturing partnership for fashion.
In general, luxury and fashion conglomerates are trying to concentrate on their core brands, said Antoine Colonna, head of the luxury goods research team at Merrill Lynch in Paris. “Look at what happened with LVMH Moët Hennessy Louis Vuitton and Christian Lacroix,” he said. “It’s all about whether the brand becomes a management distraction and is taking too much energy from the core.” Colonna said he expected to see more of the same from the big luxury players, but added that this opened a door for private equity players to move in and grab noncore assets.
Serge Weinberg, the former PPR chairman who now runs Weinberg Capital Partners venture capital fund, said, “It’s always difficult for noncore businesses in a big group, but it’s even more so when you’re dealing with ready-to-wear or haute couture in a group that knows nothing about that.”
In addition, Weinberg underscored the challenges faced by dusty brands angling for a place in today’s supercompetitive landscape. “There are revitalization stories, but they are very few. Balenciaga is a good example of a success,” Weinberg said. “A place under the sun has become very expensive today. To have a good store in the right location is more expensive than it used to be. Advertising is expensive. Breakeven is pretty high.”
Floriane de Saint Pierre, who runs an executive search and consulting firm in Paris, said the Rochas shutdown suggests rejuvenating old brands is a strategy that may have run its course.
“What is worse: Losing an old brand or not having new brands hiring talents?” she asked. “Only a few brands from the past can probably be reinvented. It should be balanced by new brands of the future.”
“Especially the large companies don’t feel comfortable managing this type of business,” agreed Nancy Flavin, a Paris-based industry consultant. “There is such a steep learning curve for some of them, and their shareholders don’t have the patience. The companies have to deliver.”
Flavin called the shutdown “a huge shame,” given that Theyskens’ designs for Rochas “still inspire a lot of people — that’s where the passion for fashion comes from.” But she noted many consumers don’t spend the way they used to, and some are turning toward less expensive clothes manufactured in emerging markets.
Historically, fashion brands lived off the proceeds of their beauty businesses. “It has always been the cosmetics that were profit-makers — that’s not changed,” Flavin said. “It’s only when the owner is a public company, like Procter & Gamble, or Clarins, that they have to make tough, what could ultimately be short-term, decisions.”
Theyskens did not return phone calls Wednesday, and sources suggested he is likely to keep a low profile until the fall and evaluate any offers that might come his way. While many would-be matchmakers were immediately pitching him as a candidate for Chloé, which has a longstanding vacancy, speculation immediately focused on the 29-year-old Belgian relaunching his signature brand, which he owns but had put on hiatus to focus on Rochas.