May 29, 2009
Lacroix Files for Bankruptcy Protection
By SUZY MENKES
Christian Lacroix, the French couturier whose artistic and exuberant pouf dresses propelled him to fame in the 1980s, became the latest victim of the global financial crisis Thursday as the U.S.-owned fashion house bearing his name filed for court protection from creditors.
The voluntary petition, similar to Chapter 11 bankruptcy protection in the United States, was filed with the commercial court in Paris, which will decide whether to restructure or liquidate the company.
Although Lacroix’s chief executive officer, Nicolas Topiol, emphasized that the brand intended to continue operating during the process, the news brings an end to a luxury business model for which Lacroix was the last of the Mohicans.
Founded in 1987 by Bernard Arnault, chairman and chief executive of LVMH (Moët Hennessy Louis Vuitton), the concept was to start with haute couture, at the apex of the luxury pyramid, and develop from it a range of ready-to-wear, accessories and fragrances. This was the system that had reaped mighty profits for established houses like Christian Dior and Chanel.
But despite years of critical success, the company failed to break even, let alone turn a profit. Mr. Arnault sold Lacroix in 2005 to the Florida-based Falic Group, known for its Duty Free Americas chain. The Falic brothers aimed to refocus the luxury brand at the peak, subsequently suppressing the lower-priced clothing and jeans lines.
“Since the acquisition of Christian Lacroix SNC, we have been committed to the brand and to its high-end development,” Mr. Topiol said in a statement. “We will continue to do so but the sharp downturn of the luxury market has significantly hurt our revenues.”
The owners had been in discussion with potential financial partners and investors for the past year, according to Mr. Topiol, who said that “this process which was in its final phase, was directly hit by the conditions of the financial markets and could not be finalized prior to the filing.”
According to people with knowledge of the situation, Lacroix was badly hit in the United States, where it has opened two stores in New York and Las Vegas and where buyers have recently reduced or canceled orders. Ready-to-wear sales for the coming autumn season were down 35 percent and losses for 2008 were €10 million, or $14 million, on overall revenues of approximately €30 million.
Mr. Topiol’s statement said only that the “long-term strategy for repositioning of the brand was dramatically hindered” by the financial crisis.
That has been evident for some time across the luxury sector, where even the biggest players are being hurt by recession and financial turmoil. LVMH, the world's biggest luxury goods company, recently scrapped a plan to open a Louis Vuitton flagship store in Tokyo. Early this year, Chanel announced the layoffs of 200 temporary employees.
Versace, an independent Italian house, is currently in a state of turmoil, announcing that revenues fell 13 percent in the first quarter of the year. The board of directors this week approved a three-year plan to steer the company through the economic crisis, while continuing to deny rumors that its chief executive of four years, Giancarlo Di Risio, will soon exit the company.
The lessons seem to be that it is now difficult to survive in high fashion without being part of a corporate group with recourse to investment for product development and flagship stores, and that the pyramid model is no longer viable.
The modern strategy, as exemplified by the growth of the Giorgio Armani brand, is a sunburst, with the designer at the epicenter and all product categories (except sunglasses, which are technically demanding) under the brand control.
Yet, significantly, an Armani Privé couture line was created to add prestige and a direct link with celebrity clients.
The loss of Christian Lacroix to Paris haute couture is immeasurable. Although the designer hopes to hold a small presentation during the July couture season, this was the last house established under the formal couture rules. Even a restructuring would likely have severe implications on his 125-member staff.
The grandeur and artistry of the couturier’s work was displayed earlier this month in the sumptuous gown created for Philomèna de Tornos, the bride of Jean de France, Duc de Vendôme, a descendent of the French royal dynasty.
But just as royalty now has less attention than celebrity, so couture has lost its unique prestige, with the word bandied about by any high-end designer. And whereas fragrances produced from the mystique of haute couture once kept the houses afloat, now it is just as likely that a hip jeans brand like Diesel or a celebrity like Jennifer Lopez will have the perfume hit that has stubbornly eluded Lacroix. Mr. Lacroix, who received the Chevalier de la Legion d’Honneur in 2002, for services to fashion, has other strings to his bow, apart from his colorful and sophisticated collections. He was creative director for Emilio Pucci, the Italian fashion house, from 2002 to 2005, while he was still within the LVMH group.
The designer also has his own XCLX company, for which he has created decor for the French TGV high-speed train, as well as hotel interiors and uniforms for Air France. He has also designed for theater, opera and dance and acted as curator for fashion exhibits, including one currently at the National Museum of Singapore.
And just today I was talking with a friend about how incredible Lacroix is.
