One day, you’re the next-new-thing toast of fashion. Then, in a dizzying blur, you’re fighting to secure your company’s future.
Time can be a bitch.
Not that you’ll hear any complaints from Proenza Schouler’s Jack McCollough and Lazaro Hernandez, often referred to as “the Proenza Boys,” though at 41, they’ve long since outgrown any common-usage claim to “boy” status — except in the looks category. Both retain ample measure of the central-casting assets that provided fine, photogenic accompaniment to their indisputable talent when they burst into fashion awareness in 2002. They were straight out of Parsons, adorable, complementary bookends with a thesis collection powerful enough to lure Barneys New York to see, shop and buy, a golden moment in the infancy of their business. (The designers look back on that moment wistfully, for obvious reasons.) Leapfrog 17 years — over the compelling run during which they won three CFDA Womenswear Designer of the Year Awards; launched an “It” bag, and decamped to Paris, where they worked their antiminimal modernism by escalating their work’s craft quotient, and their prices, too, the latter eventually beyond reason. Meanwhile, they opened and closed a store on Madison Avenue, a lingering recession took its toll, tech changed everything and the giant luxury groups expanded their domination of the sector, all taking a toll on the Proenza business. Seeking relief, Hernandez and McCollough took on ownership stakes first by Valentino Fashion Group and, more recently, a group including Castanea Partners, Irving Place Capital chief executive officer John Howard and Andrew Rosen. Security proved elusive.
Now the designers are starting anew. One year after the buyback of their company with investment from Mudrick Capital Management, and with business-side direction from ceo Kay Hong, McCollough and Hernandez feel confident about the future. In a wide-ranging conversation with WWD, they discussed it all — starting out, their success and mistakes, their Parisian sojourn, rediscovering their customer. They voiced excitement about their shift from extravagant, sometimes self-indulgent design to an approach that puts their customer — “an intelligent, adult urban woman” to whom they have rededicated themselves and their brand — front-and-center of everything they do at Proenza Schouler.
The designers don’t currently hold a majority stake in their company; right now, Mudrick, which specializes in distressed investments, does. But if the turnaround happens, that will shift. Hernandez and McCollough know they’re in the professional fight of their lives. They sounded ready and well-prepared to go for it.
WWD: We’ve talked about having this for a while and Jenny [Kim, Proenza Schouler’s publicist] would say, “When they’re ready.” Why are you ready now to talk about the company?
Lazaro Hernandez: It’s the start of new chapter. We started a lot of things a year ago and we’ve seen the fruit of those changes for the positive. I think now is the time to talk a little bit about the past and where we are today and where we’re heading. We feel comfortable right now, talking about that.
Jack McCollough: As you know, we bought back our company last year. We brought new investors into the mix, and we wanted to wait that out, give it a proper year with the new management, [to implement] this new approach we’ve been taking with collections and the way we do things, the way back-of-house is set up. Now we feel like we’re finally getting to a strong, solid place where we feel comfortable to talk about these things. Before it felt too early, going into this new deal with these new investors and our new ceo. Now it’s taking form, and we’ve got a good idea of the direction things are headed in.
WWD: Last year, you got a group together to buy the company back from John Howard, Andrew Rosen, private equity firm Castanea Partners, where Ron Frasch was involved — some very prominent names. What is the new ownership structure?
L.H.: We raised capital with a group of private investors, with the lead investor, Mudrick Capital Management. We were able to raise the money that we needed to basically take control back over the company.
WWD: Is the mood very different now?
L.H.: For a while, we had Andrew, we had John Howard, and then we brought in Castanea. There were a lot of cooks in the kitchen at one point and there was a huge board involved. For not such a huge company, it got rather complicated — a lot of really senior, heavy hitters, big guns. They had their opinions and we have our opinions. It was an interesting time, to say the least.
That’s when we decided things were changing in terms of the global landscape of fashion. American fashion felt like it was in a scary place, and we were like, you know what, let’s just be radical. Sometimes that’s just the way we are. Sometimes it works in our favor, sometimes it doesn’t.
WWD: Let’s talk about the ownership transition, and how it’s different now. What stake did you have before the buyback?
L.H.: We had very, very, very, very little. I don’t know the exact numbers. We didn’t have control, put it that way. But in a way, no one did. Everyone had bits and pieces, so that was a problem.
J.M.: There wasn’t really a hierarchy. Everyone was balanced in their pieces, but the pieces were broken up into so many different pieces.…It was hard to get things done because there was no hierarchy or no one person who was able to make the final decision. So things [often operated] at a standstill.
WWD: That sounds hard.
J.M.: It was really hard. Shirley Cook, who we started the company with, left when Castanea came in, and she was our right hand. We had this new management who we didn’t really know, so it was like what are we doing?
WWD: You have a new ceo, Kay Hong, who joined last year.
J.M.: Kay came through Mudrick. David Kirsch is the first person we talked to there. They’d worked together years ago. He said he’s been trying to get her as ceo on a number of different gigs going through his hedge fund and she’d always declined. And then this came around, he brought up the idea and she was interested immediately.…Having Kay has been game-changing to the whole business.
L.H.: She’s brilliant. She has run multibillion-dollar companies before. Not in a high fashion level, but that doesn’t matter because the fashion component comes from us. She has cleaned up the entire operation — logistics, production, accounting, finance, all those departments that Jack and I — it’s not our wheelhouse, that is hers.
It’s not super [glamorous] to talk about, but ERP is a whole new system the company is on now. So production is on time. It used to take us months to ship goods from factories, now it takes two weeks. Kay has cleaned up the entire operational side of things, margins have gone up, the efficiency of the process has gone up, price points are much sharper. And the collection architecture has been defined.
WWD: What was step one?
L.H.: The first meeting we had was a reset: Who are we designing for? What are we doing and who is this woman? At the end of the day stating that we make luxury fashion for the intelligent, adult urban woman. This woman is our peer, she is our contemporary, she is our friend.
WWD: Identifying the customer is key.
L.H.: We set this whole idea of the woman as the starting point for this new chapter; everything we do has to address her, her needs, her lifestyle, what she wants from us. Within that, there’s a lot of creative freedom; we can explore all her different facets and still do what we do. But it is very much organized around the central idea of defining who the woman is, and everything we do must speak back to that.
WWD: Had you lost sight of her?
J.M.: In Lazaro and my heads, we knew who the woman was, but when we bounce a lot to different ideas it becomes less clear to the outside world.
L.H.: It was just guardrails. It’s great sometimes to have these guardrails and to create within those guardrails and that’s what we’ve done.
WWD: You showed in Paris for several seasons. Since coming home, you’ve made several significant changes. One, you’ve returned from a two-collection structure to a four collection, with pre-seasons and runway. Two, you have stepped far away from the craft-artisanal focus in which you’ve always been interested but that escalated dramatically in Paris.
J.M.: We went to Paris for a couple of reasons. For one, in an effort to switch up our routine. We’d been doing this for a while, and it’s so relentless and such a hamster wheel, collection after collection. So it was kind of a selfish decision to explore something new, approach the collection in a different way. At a more business level, we had this idea to show during couture, which wasn’t an effort to show couture clothing.
WWD: It was more about the timing?
J.M.: It was more an effort to show during pre-collection market, when 70 percent of our business is done. We were like, “Why are we putting all this effort into our show collections, when that’s only 30 percent of the buy? What if we showed our collection earlier during pre-collection market?” It just so happens that there’s a fashion week going on then, and it’s couture. So we thought, let’s show our main line during that time. We’ll deliver early and consolidate the pre-collection and the main line into one bigger collection, and do two selling periods a year instead of four. That was our idea.
WWD: But your interest in craft and artisanal handwork escalated quite famously while you were in Paris.
J.M.: We’ve been interested in craft since we started and up until a couple years ago, we pushed the boundaries on that, seeing how much further we could take it.
Like Lazaro said, we were developing our fragrance with L’Oréal at the time, so we were spending a lot more time in Paris in the leading up to our first show there. We started doing a lot of exploratory work at these smaller ateliers that specialized in embroidery or thread work or feather work or whatever it may be. The idea was to show our ready-to-wear, but it was hard being in Paris and not being influenced by all these incredible artisans who do all this epic work.
WWD: So the primary reason was to fuse the pre- and main collections into one, show it early, sell it early, etc. You could still do that here, but you’ve backed off of that. Why?
L.H.: For us it made total sense, this whole idea of consolidating into two collections each year. But the reality is the couture calendar, although it’s close enough to [the pre-collection market], it is not exactly that same week.…We were actually late, so it was kind of neither here nor there. [In addition], the big lesson we learned, and we learned it the rough way, was that for buyers, when you’re given two opportunities to buy a collection, you’ll probably spend a little more than if you buy in just one appointment. At the end of the day, we thought that the buyers would spend their full season amount in one sitting but [they spent less].
WWD: That makes sense.
L.H.: So we saw a dip in business, which we weren’t expecting. We’d wanted to get out of this pre-collection-collection structure, just the hustle of that. But the reality is that that’s the way things are, and we just had to face that. And so we’re like if we’re going to do pre-collection and then collection, we might as well come back to New York.
WWD: What about your move away from the intense craft work?
L.H.: Jack and I felt like we pushed the craft thing to such a degree, it became couture-like, in a way — feathers, embroideries, this and that. While that was beautiful and the pictures were great and the editorial, fantastic, at the end of the day, the clothes were a fortune and really hard to do volume with. We took [craft] to the “nth” degree, and we felt that was the pinnacle, or the end of a certain chapter. So we came back to America and very controversially we did a collection of denim, which actually sold very well.
WWD: I liked that collection, but I don’t think too many others did.
J.M.: A lot of people didn’t like that collection, but for us it was instrumental in our process. We wanted to get rid of a lot of the bells and whistles of the fancy feather work and the couture sensibilities and really strip it back to real clothes. It wasn’t necessarily our favorite collection, but it led us to the path the we’re on right now.
WWD: You went from the elaborate couture-inspired clothes to denim and white shirts. Some people read that as, “OK, they’ve run out of money.”
L.H.: We were in a little bit of a tricky situation.…We were kind of like whatever happens, happens. That was right after the second Paris show. That’s when this opportunity presented itself where we’re like, if we’re going to do this for real, we need to do it on our own terms, and we need control of our company back. Because the way that it was structured was very difficult for us.
WWD: In what way?
L.H.: I don’t want to get into the specifics, it’s legal and all that. But, as we said, our ownership structure had a lot of characters, a lot of individuals involved, a lot of opinions. They had brought on management inside the company, and we felt a little bit like well, what was our place in the company that we started?
If we were going to stay involved in the company, we had to do it on our own terms, and we had to have a come-to-Jesus moment with everyone and be like, we’d like to take control of the company back. It was a whole process and probably the hardest summer of our lives.
L.H.: We weren’t really clear as to how everything would unfold, which is another reason why we did that [spring 2019] denim collection, to be honest. We put it together a lot more quickly than we’re used to doing, because we were unclear of the fate of the company. We designed it very late. The denim came from Japanese mills, so we didn’t have to deal with the August Italy closures.
Then, we’re coming back to America and it all just made sense — America, denim, we could do tie-dye out of L.A. and we could play with the artisanal in a wash-y sort of American way, and reconnect with our friends and our people that buy and wear the clothes.
WWD: It was a hit with consumers?
L.H.: After a while when you get too sophisticated and you start creating things that are a little bit maybe technically incredible, you sometimes lose the woman. For us it was really important to reconnect with the woman, which is our peers, which is our friends, which is women all around us who have always supported us. Everyone wore that collection, which is amazing. All the girls in the office are still wearing it. It felt really great just to see everyone in the clothes again. That was a great thing that happened out of that collection.
J.M.: Like Lazaro said, it sold really well. So for the first time we’re seeing a lot of the women in our lives wearing the clothes. I think the problem with collections in the past is we started pushing and pushing and pushing the boundaries of what we could do from a technology standpoint or a fabric development standpoint or shapes, whatever it was, but to the point where the clothes got so expensive. Our focus was very much on the show collection and a little less focused on the commercial side of the collection. So stores would come in, they’d want to buy the show collection, but it was basically unobtainable because it was so expensive. And then the commercial collection felt like a watered-down version of the show. So it’s interesting, that denim collection definitely led us to this path, where we’re kind of doing something in between those two worlds. Now, it’s how do we create interesting clothes we feel are show-worthy, but that women will want to wear and that we can create a solid business out of.
WWD: Speaking of which, pre-fall, which you’re about to show. Are you approaching the pre-seasons any differently?
J.M.: In the past, we were a little bit removed from the pre-collections. Now we’re really involved. They feel a lot less commercial and more directional and special, but still incredibly wearable. We’ve also worked on turning down the show collection and making wearability more of a focus there, not just creating clothes for pictures but creating clothes for wearing. So we’ve amped up pre-collection and amped down collection. It really all feels like one world now.
WWD: You’re also concerned with creative continuity from season to season.
J.M.: We want it to feel like a continuation of the last show, so it doesn’t feel like there are these hard stops between collections, but it feels like one flow, one spirit, one woman, one idea that continues to evolve.
What we have really focused on in this last year especially in moving forward is having that consistency. Although we may be interested in x, y and z, maybe we just focus on x and explore different ways of doing x, but we keep that consistency and that spirit season after season after season and not bounce around so much. That was a fault in the past — we bounced around a bit too much.
L.H.: That’s a good point, Jack.
All the interesting brands in the world today, that’s what they’re doing. Look at Gucci and Saint Laurent and people like that. They create this consistency season after season after season after season. You know what that brand stands for, you know what they’re about, you know what you’re going to get from them, and that is incredibly important. You have to stand for something; you have to represent something to the consumer.
WWD: What do you represent?
L.H.: New York fashion. There are very few designers out there doing New York fashion, adult fashion. I’m not talking about downtown, experimental fashion. That’s really cool, we love that, but we’re not teenagers anymore. We’re making clothes for adult women with a decidedly urban, New York flavor. And there’s not many doing that.
So for us, there is this amazing opportunity to create modern, urban clothes for intelligent working women. Now, our peers can actually afford the clothes, so it all makes sense to us now. We are addressing our friends’ needs, and they are professional, urban, working women who have a New York sensibility.
For us, we have the opportunity.…It’s a tricky time in American fashion right now.
WWD: It certainly is.
L.H.: I mean, that’s an understatement. We are one of the few remaining designers of our generation. You look around you and you’re like, wow, you feel a little bit alone in that world. There are the big guys and then there’s the young guys but the middle has evaporated. We feel like we’re still standing and why is that? Why are we the ones still going?
What American designer is speaking to the real adult working women, like the people Calvin [Klein] used to address, the people Donna [Karan] used to address, who is speaking to those women? Who is making beautiful, tailored, well-made clothes? There’s a few of us. There’s maybe The Row, there’s us, there’s Narciso [Rodriguez]. There are obviously others but the pool is much smaller than it maybe was a couple years ago.
WWD: Your generation came into fashion — new names, new ideas, new excitement, but with the old, then rock-solid model — the wholesale. No one could have foreseen the decline of that model and of physical retail. How do you deal with that?
L.H.: Having our own e-commerce platform has been game-changing. Our e-comm is our number-one store globally.
J.M.: Yes. And obviously, all the big online retailers we sell to are right up there with it — Net-a-porter, MyTheresa, Farfetch, Matchesfashion, Moda Operandi.
L.H.: Obviously Saks and Nordstrom and Neiman’s and all those [traditional retailers] as well. People talk about the demise of wholesale and whatnot — yes, yes and no. If you’re a Kering brand with revenues of $2 billion, yes, maybe wholesale is not how you grow further. But for a company like us, Nordstrom is still a multibillion-dollar company, Saks is still a multibillion-dollar company, Neiman’s is the same.…They may not be growing super-fast and maybe they’re not the best places for these huge juggernauts to sell there anymore, but for a company like us, they’re still valid, and they do a lot of business. If we can get more and more and more share of that business, our company can grow significantly. So we don’t discredit or discount the wholesale accounts at all. They are super important to us. They have to be because that’s our lifeblood.
WWD: Barneys was the first store to buy you. Did you find yourselves emotionally invested as the saga dragged on?
J.M.: Barneys has a very dear place to our hearts. Maybe we wouldn’t be in business right now if they hadn’t bought our senior thesis. I mean, maybe we’d be design directors somewhere, working for someone else. They took a huge risk on us and made a huge investment, and it’s what catapulted Proenza Schouler into the industry.
Barneys is where we’d always do our personal shopping; it just felt so New York. So watching that all go down — we were definitely invested in every little detail, reading the news every two seconds…it breaks our hearts.
L.H.: It wasn’t just an emotional attachment; it was also a considerable business for us. So that has been not fun, having to figure out how to navigate all the inventory we have, and figuring out where to put that next. But thank God, we have Kay, we have [chief operating officer] Mary Wang, who headed DKNY for many years on the operational side. We have an incredible chief financial officer, Jonathan Friedman. All these people are brand new. We have a new chief merchant. All these experienced people have been incredibly nimble, and that helps us navigate what to do during these times. But the Barneys thing was a big blow. We are designers, very emotional people. So it’s just so sad. And the same day the Zac [Posen] news came out, and you’re like, God….
WWD: Some in the industry have wondered vocally which other companies of your generation might not survive, including Proenza Schouler. What’s your response?
L.H.: For us that’s pretty inspiring. It pushes us further to prove ourselves.
Strangely, we are in a financial upswing. It’s been through this new deal, being able to control our destiny, to call the shots, to work with true executives who know what they’re doing. We have a financial arrangement with our partners that is incredibly agreeable. As long as they’re seeing progress, they’re willing to finance it. So there’s no sensitivity or fragility on that level for us. And we are taking all the steps that we need to do to recalibrate to the new reality of the way the world works.
Our intent is still to obviously be creative and have fun and explore our creativity; that’s why we got into this whole thing. But it’s also a business and we are determined to turn this into a real business. Very few people have been able to do that in American fashion.
WWD: Why do you think it’s so hard here? It’s not so easy anywhere, unless you’re in the LVMH or Kering stable, or your name is Chanel.
J.M.: LVMH and Kering, even the big brands here in America, represent the Amazon-ification of the world we live in. We don’t have a big conglomerate behind us, doing huge media buys and having their foot in a million real estate ventures. We are not the new, fresh designers that have that energy behind them, either. We’ve been around for a while, we’re established, but we are still independent and navigating what is definitely a tricky road.
But like Lazaro was saying, with all of the changes we’ve made over this last year, rethinking who our woman is and what her needs are, cleaning up all this back-of-house stuff, delivering early — I mean, we were always chronically late in the past. And with all this clean up of back-of-house, our clothes are getting there so much earlier and we’re seeing the results from something as simple as that.
WWD: Another change: the repositioning of Proenza Schouler White Label.
L.H.: White Label has been really interesting. Before, we had this thing called PSWL.…I don’t want to say we were forced to do it, but it didn’t make sense — we were showing during Paris couture and then we’re showing PSWL sweatshirts and T-shirts and it was confusing. And it all sat in the same department. It was like, what is this?
So we got rid of that, we cleaned house, and now it’s White Label [renamed for pre-spring 2020], which is just a casual component to the same woman’s life. If main line is her more public persona, what she wears to work, for evenings and whatnot, Monday through Friday, White Label is her private life, the clothes she wears to be more intimate. Let’s say it’s more her weekend attire. It’s still elevated, it’s still the same woman, but it’s the more casual expression of her closet.
WWD: Reaction to it?
L.H.: It’s been a year and we’re honestly surprised by the success. We’ve sold two markets, pre-spring and spring, and it’s been a great success. Because of that and a lot of other things, it just feels like we’re on this great new track. It’s inspiring for us.
WWD: Accessories. Ten years ago you had what what was one of the last “It” bags, the PS1. What’s the state of your bag business today?
L.H.: We’ve completely relooked at and cleaned up the entire back-of-house of bags and how we were producing them. We had this crazy infrastructure in Italy…
J.M.: We still produce everything in Italy, but we had our own setup in Scandicci, outside of Florence, and it wasn’t cost-efficient. So we’ve worked on cleaning that up and pretty much closed down [our facility] and are working with different factories and approaching that back-of-house part of development and production of bags in a very different way.
WWD: You’ve done a number of collaborations, including Birkenstock, a current one with the director/filmmaker Harmony Korine for the PS1 bag’s 10th anniversary. What appeals to you about collaborations?
J.M.: It’s got to feel organic. It’s got to be with a person or an artist or a brand that resonates with us. We did a few films with Harmony Korine years back. And it seemed kind of interesting to bring him back into the mix for this anniversary bag because we first collaborated with him 10 years ago, around the same time with the launch of the PS1.
L.H.: It’s so nice to cross-pollinate with different industries, with musicians, with art. They bring ideas to the table that you never would have thought of and force you to think things in a different way…it’s just inspiring because what we do is so insular. We’re there with our studio, with our stylists, with our teams. It just opens you up to new ideas. So we’re super open to collaborations and if they make sense to us then we’d love to explore them.
WWD: You’ve also collaborated with Birkenstock. How’s your shoe business overall?
J.M.: The shoes are a big push for us right now. The Birkenstock thing is interesting because it puts our name on footwear on a mass democratic level; we’re hitting all sides of the market. We were worried, too, about what the numbers would be for this last show because it’s the same time we launched Birkenstock; we wondered if the stores would put all of their budgets into the Birkenstock thing and buy less of the actual collection. And we saw double-digit growth. It was pretty great.
WWD: You keep going back to putting the back-of-house in order.
L.H.: We’re designers. And as designers, as you know, as you’ve met many of them, that is not our strong suit. The whole operational side of thing is not our forte. So while we were putting out collection after collection after collection, that whole back-of-house stuff was falling by the wayside. Now it’s so great, this new system, It’s been great having these new people whose forte it is to create and develop these kind of back-of-house systems and implement that.
J.M.: We’re in a phase right now where it’s like heads down and do the work and create amazing product that is priced to sell, but still super interesting and super directional — and decidedly fashion.