Ah, the luxury industry. Immune to the vagaries of the current economy? I think not!!! This is my week of last week:
MONDAY — a posting on the wsj.com about the company I work for which reads:
- APRIL 8, 2009, 11:01 A.M. ET
WSJ: Christian Lacroix Owners In Talks On Stake Sale – Sources
By Vanessa O’Connell
OF THE WALL STREET JOURNAL (212-416-4653; 917-655-7075)
Owners of the iconic but unprofitable Christian Lacroix couture fashion house are in discussions with private investors about selling a stake in the design house, according to two people familiar with the matter.
Terms of a sale by Florida-based Falic Group to the investors – possibly of a majority stake – aren’t final, and the negotiations could still fall apart. But the talks over Paris-based Lacroix, which belongs to a tiny and shrinking club of dedicated haute-couture design houses, reflect the growing pressures on apparel designers, particularly those that depend on sales to U.S. department stores to survive.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com)
Lacroix, whose spring 2009 looks include a $6,685 silk calligraphy print gown and a $4,505 silk trench-coat with a ladybug print, has recently seen cutbacks in orders from many of the major U.S. upscale department stores that carried the line last year.
Lacroix generated an estimated 2008 overall retail sales volume of about EUR40 million ($53 million). Its wholesale sales are about half that, the people familiar with the talks say. Generally, investors buying a stake of an unprofitable fashion house might value the company as 0.5 to 1 times revenue, according to industry bankers.
Messages seeking comment from executives at the Falic Group weren’t returned.
Falic Group, which is run by three brothers, is best known for its more than 100 duty-free shops in airports and border towns across the U.S. It also owns two small teen-cosmetics companies, Hard Candy and Urban Decay, which it bought from LVMH Moet Hennessy Louis Vuitton (12101.FR) in 2003.
Falic bought the House of Christian Lacroix from LVMH in 2005. Nicolas Topiol, the chief executive of Christian Lacroix, had to build an infrastructure for Lacroix, which had previously relied on a sister company within LVMH, the world’s largest luxury conglomerate, for basic functions such as sourcing, sales, accounting and warehousing.
Under Falic’s ownership, Lacroix also opened two of its own boutiques in the U.S., one on New York’s 57th Street and the other in Las Vegas. The U.S. accounts for about 15% of Lacroix’s total sales.
Understanding that Lacroix would have to open more stores to drive sales, the Falic family began looking about a year ago for another investor to help share the burden. The problem has been that not many buyers would be willing to spend on extravagant fashion shows for a new acquisition that doesn’t generate a profit.
Falic has yet to make Lacroix profitable, and the design house recently incurred what one knowledgeable person said were “significant” losses. Another person familiar with the matter said that Lacroix would soon be downsized. It currently has a little more than 100 employees, up from about 60 in 2005.
TUESDAY — another little tidbit:
Apr 07, 2009 @ 9:53am
Christian Lacroix’s in need of new financial backing.
Florida based Falic Group, who bought the house from LVMH in 2005 is said to be looking for someone to buy a majority stake in the company. In the past four years, they’ve opened two stores stateside and almost doubled the number of employees. Still, they’re not even close to making a profit.
The problem, according to the Wall Street Journal, is that no one wants to invest money in something that hasn’t been profitable in years. Especially these days.
We can’t imagine couture sales swinging upwards this season and it’ll be impossible for the brand to make a profit without opening more stores, which won’t happen without a major influx of cash.
Who’s making the Save Lacroix tees?
Fashion House Lacroix Seeks Partner
The owner of the iconic but unprofitable Christian Lacroix couture fashion house is in talks to sell a stake in the firm to private investors, people familiar with the matter said, as cutbacks by U.S. department stores take a toll on apparel designers.
Paris-based Lacroix, one of a tiny and shrinking club of haute-couture design houses, has looked for investors amid falling sales of luxury goods. Neiman Marcus Group Inc., Saks Inc., Nordstrom Inc. and Barneys New York have reduced orders for fall 2009 merchandise from designers.
Neither the terms being discussed by Lacroix’s privately held owner, Florida-based Falic Group, nor the identity of the investors could be immediately learned. The talks were reported earlier by Women’s Wear Daily. The negotiations could still fall apart, the people said. Other luxury goods makers, such as Italy’s Brioni Roman Style SpA, also have been seeking investors amid weakening sales.
U.S. stores “aren’t taking any risks” on designer labels that might not sell well at their stores in the recession, said Pierre Mallevays, managing partner of Savigny Partners LLP, an advisory firm in London. Retail buyers “are favoring brands that have a proven sales record — and even then they are cutting orders by 20% or 30%,” he added.
Spokesmen for Nordstrom and Neiman Marcus said their stores dropped Lacroix after carrying it last year. Buyers for Saks purchased Lacroix’s spring styles but didn’t place any orders for its fall 2009 collection, unveiled earlier this year.
Barneys New York, a unit of Istithmar World, an investment arm of the Dubai government, placed orders for fall 2009 Lacroix merchandise, according to a person with knowledge of its plans.
Lacroix, whose spring collection includes a $6,685 silk calligraphy print gown and a $4,505 silk trench-coat, generated 2008 wholesale volume of about $27 million and about $54 million in total sales at retail stores, according to people familiar with the matter. Lacroix recently incurred “significant” losses, one of these people said.
Falic Group didn’t respond to requests for comment. It is controlled by brothers Simon, Jerome and Leon Falic and operates over 100 duty-free shops in airports and border towns across the U.S.
“An haute couture business is very, very expensive to maintain,” said Imran Amed, a consultant to luxury goods firms. Lacroix has that “big cost structure but hasn’t realized the revenue streams on the other side to offset that,” he said. Chanel and Christian Dior Couture, by contrast, get royalties from licensing those brands in fragrance and sunglasses.
Falic bought the House of Christian Lacroix from LVMH Moët Hennessy Louis Vuitton SA in 2005. Under its ownership, Lacroix opened two of its own boutiques in the U.S., one in New York City and the other in Las Vegas.
I get a call from my accounting office: “Michelle, your corporate credit card has been cancelled.” Hmmmmmmm.
Call the office to see what is going on with all of these rumors. No information and told to leave early and enjoy the afternoon. Hmmmmmm, again. Hmmmm.