The Risks of Changing Creative Directors
Changing the guard at the creative helm of a major fashion house is capital-intensive but can reap great rewards. What’s at stake when fashion houses cycle through designers?
LONDON, United Kingdom — Changing the guard at the creative helm of a fashion house is often necessary to transform stagnant brands and boost business results. Indeed, new creative directors have successfully reignited some of fashion’s top houses. In 2014, three years after Hedi Slimane took the creative reins of Yves Saint Laurent, the business drove €707 million in sales revenue for parent company Kering, up 27 percent on 2013. Meanwhile, Céline — once dusty and dormant — under Phoebe Philo’s direction now drives upwards of €750 million in sales for LVMH, according to market sources.
But along with the promise of reward, making these kinds of changes at the creative helm of major brands comes with serious capital expenditure and significant risk, not least that the new partnership won’t endure long enough to deliver return on investment. In the last six months alone, head designers have departed from Dior, Lanvin, Zegna, Balenciaga and Berluti. Stefano Pilati, Alexander Wang and Raf Simons all spent less than four years in their most recent jobs — at considerable cost.
Installing a new creative director isn’t cheap. For one thing, creative directors, who are often paid millions of dollars, rarely arrive alone and companies must face the logistical and financial challenges of accommodating not only their new hire, but his or her team. For example, when Dior hired Raf Simons in 2012, the company also hired Pieter Mulier, Simons’ right-hand man, and re-organised the entire operating model of the studio to suit Simons’ approach. Meanwhile, when Hedi Slimane joined Saint Laurent in 2012, the brand set up a design studio with a team of fifteen in Los Angeles (thousands of miles from Saint Laurent’s headquarters) where the designer lives. Similarly, Paris-based Céline created a new studio in London for Phoebe Philo when she joined the house in 2008, requiring scores of employees to shuttle back and forth between London, Paris and Florence, where the company’s leather goods operations are located.
Introducing a new aesthetic often requires extensive renovations to retail stores. As a case in point, Gucci is currently undergoing a complete revamp of its store network so as to better communicate Alessandro Michele’s new creative vision for the brand. According to Mario Ortelli, senior research analyst for luxury goods at Sanford C. Bernstein, updating Gucci’s 512 stores will take three to four years to complete and will cost between €650 million and €850 million. This year alone, Gucci’s investment in store renovations will add up to the equivalent of 10 to 20 percent of total revenues.
“The timing of the store rollout is vital,” said Ortelli. Brands must find a balance, he says, between “spending a lot and hurting profitability” by revamping all of their stores at once and delaying renovations for too long after the appointment of the new designer, by which time existing stores will feel “old and inconsistent.” A brand might shell out millions for store renovations without seeing a return on investment for several years, Ortelli added.
However, failing to revamp stores to reflect the arrival of a new creative director carries its own risks. During Raf Simons’ three-year tenure as creative director of Christian Dior, the company did not embark on a major store refreshment programme. While this saved Dior the costs associated with renovating its entire store network, some saw it as restricting Simons’ creative control and a contributing factor to the designer’s disenchantment with the house.
Then, there’s the task of introducing a new designer’s products to stores. This can be done in two ways. Initially, Gucci stores were selling Alessandro Michele’s collections alongside older products by previous creative director Frida Giannini and the house’s core ‘hero’ products such as loafers and monogram bags. Customer response to Michele’s new collections is critical to the brand’s future and Gucci must be careful not to create a confusing clash of new and old aesthetics, warned Ortelli. However, leather goods make up 57 percent of Gucci’s overall revenue and, in order to maintain sales, popular handbag styles such as the Soho or Swing must remain in stores.
On the other hand, Céline and Saint Laurent both wiped the slate clean when their new creative directors took the reins, completely removing old products from stores. These brands are less dependent on leather goods — at the time of Hedi Slimane’s arrival in 2011, leather goods made up about 35 percent of Yves Saint Laurent sales — so abandoning old product to introduce a new designer’s aesthetic carries less risk.
But a full changing of the guard also takes time to yield results. Under Hedi Slimane, Saint Laurent revenues grew more than 20 percent each year from 2012 to 2014, according to a report by Sanford C. Bernstein. However, Saint Laurent sales did not show sustained outperformance of the overall luxury goods market until a year and a half after the designer’s arrival, said Ortelli. Similarly, he predicts that Alessandro Michele’s creative direction will take at least one and a half years to translate into significant sales traction, despite the company having already invested millions of euros to implement the designer’s new aesthetic.
So why, then, are brands churning through designers so quickly?
As an industry, it doesn’t seem viable to have designers turn over as quickly as they have been at the industry’s top brands. Indeed, the founding designers of many prestigious houses, from Chanel to Giorgio Armani, spent decades at their eponymous labels. After the departure of Raf Simons, coming so soon after Galliano’s exit, Dior must now appoint its second new creative director in under four years.
While Simons’ decision to leave Dior seems to have been his own, many other brands may not be giving their creative directors enough time to settle into their roles. Fashion houses may not benefit from the kind of free-agency deals that see professional athletes hopping from team to team. A true long-term collaboration between a designer and a house — for example, Phoebe Philo at Céline (eight years), Tomas Maier at Bottega Veneta (15 years) and Riccardo Tisci at Givenchy (11 years) — usually yields a much higher chance of creative and commercial impact.
