From the looks of things on Monday during a private presentation at Lanvin’s men’s flagship in Paris, it may not have been inherently obvious that the brand is in disarray. While Nicolas Druz – who recently took over as chief executive officer of the Paris-based design house – discussed his desire to “return to the DNA of Jeanne Lanvin” by emphasizing the brand’s history of embracing art, auditors were alerting a French commercial court that Lanvin’s already “worrying” financial situation has become increasingly dire.
Nonetheless, the filing – as required by a French law that calls on auditors to inform company management, as well as file court warnings, when a company’s operations risk being compromised due to financial hardship – should come as little surprise given the consistent reports of deepening “crises” at the house that Jeanne built.
The Beginning of the End of the Status Quo?
Business as usual began to take a very public turn for the worse for France’s oldest fashion house in October 2015 when WWD revealed that Lanvin’s then-creative director, the beloved Alber Elbaz, had been “ousted from the company after a stellar 14-year tenure.” In a statement, Elbaz characterized his dismissal as a result of “the decision of the company’s majority shareholder.” Lanvin opted for a brief statement confirming that it had, in fact, ended its collaboration with Elbaz and “thanking him for the chapter he has written” for the brand.
According to reports in November 2015, Lanvin’s controlling shareholder, Shaw-Lan Wang – the Chinese media magnate who acquired the brand from L’Oréal in 2001 – and then-chief executive officer, Michele Huiban, sent a letter to all Lanvin employees claiming Elbaz was ousted due to “the quality of his designs,” a point that Elbaz subsequently contested and over which he threatened to sue, citing defamation. And to sully even further what the industry rather uniformly deemed to be an utterly “shocking” ouster, Lanvin landed in court in Paris, following the initiation of a legal battle between a house divided. In one camp was Lanvin’s work council, Comité d’enterprise (which operates as an intermediate entity between its employees and executives), as well as its designers and other staff members. In the other: The brand’s upper management, including Wang and Huiban.
Lanvin’s executives, according to the New York Times, “accused the Comité d’Entreprise of abusing the internal communications network, fomenting unrest [following] Elbaz’s departure, and groundlessly alerting the board of directors to concerns about the company situation, especially its financial situation.” The Comité d’enterprise, on the other hand, argued that management was not willing to listen to their requests for a hearing regarding Elbaz’s abrupt firing, and failed to provide answers as to why he had been fired and what the strategy was for the company’s future. After being fined just upwards of $3,000 in damages to cover legal costs by the court, Lanvin management said it would not pursue the court case any further, and hoped to engage in more constructive dialogue with the employees.
Legal issues aside, Lanvin has faced no shortage of other setbacks. Consider, for example, how in just as many years, Lanvin has ousted two creative directors. In addition to Elbaz, Lanvin appointed and then let go young couture star Bouchra Jarrar after just two seasons, replacing her with Olivier Lapidus, whose debut in September spawned less than praiseworthy reviews, including one from the Times, entitled, “How to Wreck a Brand in 3 Years.”
The house’s creative woes come amidst looming reports of impending job cuts. Earlier this year, it was reiterated by the fashion press that Lanvin was facing a “crisis” due to consistently falling sales. According to Reuters, sales fell 23 percent in 2016 to 162 million euros ($182 million); that is a 73 million euro drop from 2012 when the house’s sales topped 235 million euros. Add to that, the company’s provisional forecast for 2017, which anticipated sales falling by 30 percent.
In light of such disappointing figures, Lanvin appointed advisory firm Long Term Partners this summer to conduct an audit and “recommend ways to reduce the company’s cost base.”
In Need of Cash
As of now, Reuters’ sources say that “Lanvin needs an injection of cash to buy some breathing space or it may not be able to pay employees’ salaries in January. However, they added that a recapitalization originally discussed for September may happen by the end of the year.”
The house’s need of cash is yet unsurprising revelation. It comes on the heels of reports early this year that Wang “has been reluctant to invest in the brand for many years. Wang would also not let her associate, private investor Ralph Bartel who owns 25 percent, inject more cash into the business as it would dilute her stake.” This is said to be one of the reasons that Wang fell out with Elbaz, who was reportedly “frustrated by Wang’s refusal to invest in Lanvin, particularly in areas crucial to growth such as new boutiques and accessories, several sources said.”
There is more to the house’s financial woes than what management has called a lack of creative output, and a widespread fall in orders for new collections from multi-brand shops and department stores, as a result. Given that some 70 percent of the brand’s revenue is said to have routinely come from ready-to-wear sales, alone, it seems safe to say that Lanvin has fallen behind in terms of providing accessible and/or appealing licensed goods, such as cosmetics and eyewear – which tend to significantly drive revenue for most high fashion brands. Also not being put forth by Lanvin with any marked frequency compelling accessories, such as leather goods and footwear. Although, it is worth noting that Lanvin is currently turning out not-unattractive $1,450 small Cabas totes and $1,995 shoulder bags, which are being stocked by Saks, SSENSE, and MyTheresa, a move that suggests that maybe its plan become “a French Michael Kors,” as reported this fall by BoF, will mean a focus on accessories. After all, Lanvin has not had an “it” bag in any recent memory, whereas Michael Kors largely made its name on accessories, albeit more accessible ones.
As for the active licenses that Lanvin does maintain, these are not without strife. For instance, Lanvin is said to be in the midst of a dispute with Itochu – Japan’s second largest general trading company – over its Japan-specific licenses. And while it does boast a fragrance deal with Inter Parfums, its frequency of such releases have been inconsistent, at best, in recent years.
With all of this in mind, a source told Reuters in January that “the company’s situation is deteriorating fast and now it is in a stalemate” thanks to Wang’s unwillingness to compromise. “Since Mrs. Wang simply refuses to sell or (let the capital) be diluted, there is nothing we can do about it. It is so sad for the brand and its staff.”
Despite Wang’s reportedly lack of willingness to inject cash into the company, she made headlines in 2016 and then again early this year after reports began circulating that she was considering offloading brand for roughly 500 million Euros ($537 million). The interested party? Mayhoola for Investments, the Qatari conglomerate backed by Sheikh Tamim, al-Missned, the monarch and head of state of Qatar, and the current owner of Valentino, Balmain, and Pal Zileri.
While neither bout of acquisition rumors came into fruition, it would not be shocking if yet another round may be upon us in the not so distant, if an investor is willing to take on the challenge, that is.
UPDATED (11/7/2017): Per Reuters, “Shaw-Lan Wang will inject fresh cash into the label by the year-end.” Moreover, Nicolas Druz told Reuters on Tuesday that Lanvin was looking at branching into new avenues such as “art of living” products, which usually includes high-end homeware, and could also look at hotel projects using the Lanvin name, he said, without elaborating on how this might work.