Last week news broke that LVMH, the luxury conglomerate presided over by French tycoon Bernard Arnault, had its stern, unwavering eyes on New York brand Proenza Schouler, which this year celebrates its fourteenth birthday. Delphine Arnault, his daughter and executive vice president of Louis Vuitton, said last year: “I love what they do. They have an amazing talent—just look at the fabrics. We’ve been following their work for a while.”
That stealth strategy–of waiting by the sidelines for the hype of social media to fatten up these brands like golden geese, plump and ready to be carved–seems to be working. Last September, Kering took a minority stake in Altuzarra, another hip New York label founded by Joseph Altuzarra, whose business has ballooned in the Age of Instagram (I promise I’ll never use this awful phrase again). Months prior, Kering welcomed Christopher Kane, the man responsible for all those gel-filled PVC clutches you may have seen all over cyberspace, to its illustrious dinner table. And, of course, Alexander Wang, who is now creative director of Balenciaga. If these rumours are true, and LVMH does indeed seize the rumoured 40 percent stake in Proenza Schouler, perhaps Bernard Arnault can finally release that grudge we all know he’s been holding onto: The “Gucci Grudge,” as I like to call it.
Proenza Schouler was founded in 2002 by Jack McCollough and Lazaro Hernandez, both fresh out of Parsons. Success was written in the stars. They sold their senior thesis at Parsons to Barneys New York, and, in 2004, the duo become the first ever winners of the CFDA Fashion Fund. With a cash injection of $200,000 and mentoring by Rose Marie Bravo, then CEO of Burberry, they quietly built a brand on “seamed corset tops, casual pants and soft jackets with shrunken proportions,” as told by Vogue. Since then, their aesthetic has hardened into sharp sleeves, flared skirts and structured cocoon coats—too reminiscent of Ghesquière-era Balenciaga, the critics say—but their hugely popular PS1 bag, their first ever, is the real motor of their machine. “Brands can go years without achieving that,” said Bravo. “They nailed it the first time.”
So why exactly does this acquisition matter? And why now? Here are five points to consider.
It’s really just a tense lover’s quarrel between Arnault and Pinault.
In 1991, Bernard Arnault (who by now had control of Dior, Céline, and Givenchy) took a look at Gucci and deemed it unworthy of his company. According to The New York Times, losses at Gucci were an astronomical $170 million between 1991 and 1993, and Arnault remained assured that he had dodged a bullet. Then, Tom Ford was promoted to creative director, prices at Gucci were lowered slightly to better compete with its rivals, and despite initial negative reception from the press, the public was obsessed with what they saw. Gucci sales soared from $264 million in 1994 to $880 million in 1996.
Arnault soon realised his mistake and watched, from a distance, Gucci become one of the most profitable brands of the 1990s. In early 1999, as Dana Thomas writes, Arnault spent $1.4 billion to buy 34.4 percent of Gucci stock—some of which he purchased from Prada—and attempted an insidious takeover of the company. Tom Ford and Gucci’s chief operating officer, Domenico De Sole, fought back. They turned to François-Henri Pinault, a French financier who controlled PPR, to negotiate a deal that would lead to one of the biggest takeovers in fashion history. “Pinault bought 40 percent of Gucci, for $2.9 billion—or $75 a share, $10 less than Arnault was willing to pay,” says Thomas, in her book, Deluxe: How Luxury Lost Its Lustre.
The luxury game is little more than a self-indulgent, priapic arms race between these two men. Since Gucci, LVMH and Kering (formerly PPR) have been in constant competition to acquire the best brands from the brightest talents. Proenza Schouler, which has already been traded from the Valentino Fashion Group to Permira, then to a group of investors led by Andrew Rosen (founder of Theory), is waiting its turn.
LVMH could be grooming the Proenza Schouler boys to take over one of its other brands.
The key benefit of having these brands at his service, and these star designers at his dinner table, is that Arnault can shift the seating arrangement and play puppet master to his own sadistic whim. John Galliano entered the LVMH family as lead designer of Givenchy in 1995; one year later, he was moved to Dior, and LVMH purchased a minority stake in his label from John Bult. In 1997, Marc Jacobs became creative director of Louis Vuitton, and an investment from LVMH in the same year allowed him financial freedom to develop his namesake brand. Alexander McQueen’s story, however, is a little different: he received almost no financial backing from LVMH, despite designing for Givenchy between 1996 and 2001. He later told the press that his contract was not conducive to creativity. It is Kering that finally invests a majority stake in McQueen’s brand in 2001.
Why didn’t Bernard Arnault invest in McQueen, too? Too savage, perhaps. More than once during the negotiations, as rumour goes, McQueen stood up and told Arnault off like a petulant schoolboy. “Look, they’re the cart and you’re the only horse who can pull it,” McQueen’s lawyer said, in an effort to quell his client, an anecdote comically illustrated in Deluxe. Whatever the case, business on both ends worked out pretty well. McQueen’s name is burned into fashion lore, and LVMH makes billions, consistently. For Proenza Schouler, though, the tricky thing is to prove they have enough talent to sustain a long-term business investment, and not sporadic sparks of creativity. If these rumours come to fruition, and the team can make it through the first few years with Arnault hanging over their shoulders, they may supplant Marc Jacobs as his most precocious progeny.
It fits perfectly into their business model.
“Our model is Chanel,” said Lazaro Hernandez, in a 2004 Vogue profile. McCollough agreed, adding, “We definitely identify with that house because of its sense of timeless chic.”
It’s an ambitious plan, but ultimately a paradoxical one. The very nature of timelessness is contingent on, well, time: how much of it does a designer have to create not only beautiful products and a loyal customer base, but also a legacy? It takes a lot of time to build something timeless—what a sick joke. And you need money. Lots of it. Money that Proenza Schouler does not have, because a runway show alone could rack up tens of thousands of dollars in rent and staff fees (let’s not get into the cost of opening a store). It’s money that they won’t be able to generate from the sales of handbags alone. Fortunately for them, it’s money that LVMH has, boasted in its annual financial reports. Money that is ready to be put to good use. And why Chanel? Chanel, the institution and symbol of French nationalism, emerged from the decades-long regrets and disappointments of its founder, who spent years suing the Wertheimers to regain control of her name. Something to think about, boys.
Proenza Schouler could very well become the first American luxury brand of the 21st century.
When Proenza Schouler and Oscar de la Renta tied for Womenswear Designer of the Year at the 2007 CFDA Fashion Awards, it disturbed the hierarchy of American fashion. Two seemingly conflicting aesthetics—one urbane aggression, the other vintage romanticism—were raised to the same platform, and journalists considered Proenza Schouler as a serious contender of new American luxury. The “old establishment,” which included Marc Jacobs (where McCollough interned), Michael Kors (where Hernandez interned–Kors even donated fabric to their graduate collection), and Narciso Rodriguez, founded pre-1999 brands. There was nobody in the post-2000 era who carried significant weight, unless, of course, you count Tom Ford, whose brand gained credibility with carry-over respect from Gucci. Proenza Schouler could become the luxury leaders of this generation.
There’s two of them. Yes, that matters.
I can think of just two design duos who have large group investment: Viktor & Rolf, and Dean and Dan Caten of Dsquared2, both brands owned by Renzo Rosso of OTB (Only The Brave) Group. On top of a business relationship, design duos also share an intensely personal relationship, involving incredible degrees of trust and communication. I admire them, really: even small group assignments test the limits of my patience. Perhaps conglomerates avoid design teams because it can make things needlessly complicated. Nobody thinks they’re going to break up, until it happens.