Can Fosun Make Lanvin a Billion-Dollar Brand?

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PARIS, France — On Wednesday, Lanvin women’s artistic director Olivier Lapidus will present his Autumn/Winter 2018 collection to a room of editors, buyers and, presumably, representatives from Fosun, the Chinese conglomerate and investment company with assets of more than $75 billion that recently acquired a majority stake in the world’s oldest continuously running fashion house.

The clothes may prove an afterthought, especially as Lapidus’ fate at the label, after a poorly received show last season, is questionable at best. Right now, observers are more interested in what’s next for Lanvin following the deal with Fosun, which is injecting €100 million into the near-bankrupt business and plans a major reconfiguration, requiring long-time owner Shaw-Lan Wang, who bought Lanvin from L’Oréal in 2001, to relinquish control. The deal has also helped to re-engage former board member Ralph Bartel and other minority investors. Bartel, who previously held 25 percent of the business, is reinvesting in Lanvin.

While Qatari investment vehicle Mayhoola, which owns Valentino and Balmain and has long pursued Lanvin, was said to have nearly closed a deal to buy the storied French house before the holiday season, Fosun swept in and offered a solution that allowed Wang to save face. (While she still owns about 20 percent of the company, Wang has the option to sell her shares over the next year or two and is expected to do so. Mayhoola, on the other hand, sought complete control immediately.)

The cash injection from Fosun was necessary to keep Lanvin from going bankrupt, but money alone won’t unlock its potential, which is widely believed to be far greater than what Wang was able to do with the business.

In 2016, Lanvin’s revenues were just €162 million, a 23 percent dive from a year earlier and its first loss in more than a decade. (2017 revenues were even lower, according to sources.) Even at its peak, the label was far from realising its full potential. Alber Elbaz managed to turn Lanvin into a star brand that became globally known for its woman-first ethos and chic cocktail dresses. But in 2015, the business only generated €210 million in revenue, a far cry from competitors with similar brand heritage, many of which drive over a billion dollars a year in sales.

So, what will it take to realise Lanvin’s potential to be a billion-dollar-plus brand?

Business-side restructuring

On the press release announcing the Fosun deal, Lanvin chief executive Nicolas Druz was cited as the company’s “current CEO.” Many believe the qualifier has a deeper meaning. Druz, a long-time advisor to Wang, is thought by some to be ill-suited for the job and on his way out. The board will conduct an executive search to fill the position and to almost completely rebuild the management team, further establishing that Wang — who often hired her friends, or friends of friends, without alerting the board — is no longer in control of the business.

Creative-side reset

It’s likely that new leadership will replace Lapidus, another long-time friend of Wang’s, with a new creative director, although that search is just getting underway, according to sources. The timing of the changeover will depend on whether or not the future creative lead is currently installed in another position. If the new hire is required to take a garden leave due to a non-compete clause, it could be several months. Men’s artistic director Lucas Ossendrijver, whose collections continues to attract both critical acclaim and commercial success, is more likely to continue at the company. “The creative responsibility is the most important in an industry where you thrive on innovation,” said Luca Solca, a luxury analyst at Exane BNP Paribas. “It is conceivable that this will be a high priority.”

While outsiders remain hopeful that Elbaz — whose contract was terminated in October 2015 after a falling out with Wang — may return to Lanvin, the prospect is unlikely, according to sources. Elbaz never directly owned shares of Lanvin, but rather shares in a holding company controlled by Wang and the new deal contains no provision for any kind of exchange of these shares, which have been diluted by the Fosun deal, for Lanvin shares. (In late 2017, Elbaz was awarded over €10 million in back compensation in an out-of-court settlement, according to reports. However, a separate claim, which if successful would have allowed him to trade his shares for Lanvin shares, was not granted.) What’s more, while Wang was widely blamed for mishandling Elbaz’s dismissal, Lanvin’s sales slump began under Elbaz and his failure to build a high-performing handbag range proved problematic.

As for who may take the reins instead? Some have pointed to Simon Porte Jacquemus, who is consistently mentioned in talks around open creative director positions, although headhunters will likely cast a wide net.

Focused expansion

Lanvin is currently sold in more than 50 countries, with a significant percentage of sales coming from Ossendrijver’s suiting, still favoured among bankers and other white-collar executives. On the women’s side, a creative overhaul will not only require a revitalised runway collection, but also a refresh of store branding and marketing. Accessories, however, are the major growth opportunity. While Elbaz’s shoes — in particular, embellished ballet flats and trainers — and ornamental jewellery were a hit, he failed to develop a strong bags business, an essential growth lever.  

“Handbags are a very important category to drive space productivity and profitability,” Solca said. But it won’t be easy. “Our research shows that this has become a very crowded category with many brands trying to break through — and in most cases, failing to do so.”

Beauty could be another long-term lever of growth, but not for the time being. That’s because Wang sold the trademark registrations for cosmetics in 2007 to Interparfums SA for just €22 million. Lanvin has the option to buy it back in 2025.

Careful brand preservation

While Fosun was more flexible than Mayhoola, analysts have questioned whether the conglomerate, which owns a minority stake in upscale American brand St. John’s Knits, has the know-how to successfully manage a luxury brand. Recently, Italian lingerie label La Perla exited talks with Fosun after it reportedly refused to keep production in Europe. (La Perla was instead acquired by investment firm Sapinda Holdings.) The remaining members of Lanvin’s workers union are said to be concerned about Fosun’s lack of experience in the luxury sector, which requires careful brand management and the patience to place and develop long-term bets.

But Bartel, Wang and other minority investors seem convinced that Fosun is serious about luxury. “As China becomes the main growth driver of the global luxury market, we are confident that Fosun can bring great incremental value to Lanvin with our global resources and expertise, while being absolutely committed to Lanvin’s high luxury positioning and its exceptional quality of products manufactured in France and Italy,” Joann Cheng, vice chief financial officer of Fosun International and executive president of Fosun Fashion Group, said in a statement at the time of the acquisition. “Going the accessible luxury route would be a waste of brand equity,” added Solca. “I don’t think they will do that.”

“An authentically French brand should be designed and made in France. People value the value,” said Nobuko Kobayashi, analyst at A.T. Kearney, warning that Lanvin “may find it harder to attract new talent once Chinese-owned.”

Along with maintaining quality control, Fosun will need to ensure that what little is left of Elbaz’s legacy, not to mention that of founder Jeanne Lanvin, remains intact. While the house owns no real estate, it continues to occupy its original headquarters, which includes the former office of Jeanne Lanvin, as well as its flagship men’s store, which was recently sold by descendants of the house’s namesake for €150 million to Swiss luxury conglomerate Richemont. While it may not be able to afford Richemont’s rent, maintaining some semblance of the house’s history is essential. (A representative for Lanvin and Fosun declined requests for comment for this story.)

“Not all brands can go through more than a century’s time and still shine and be admired like Lanvin,” Fosun’s billionaire chairman, Guo Guangchang, has said. “We feel honoured to become its new partner and believe this globally renowned brand and its rich history has tremendous growth potential.”

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