29/02/2008

By Christina Passariello Wall Street Journal

PARIS – For years, fashion houses had one of two kinds of owners: designers who founded their eponymous fashion houses, or big conglomerates with a bouquet of brands.

Taiwanese publishing magnate Shaw-Lan Chu-Wang represents a new breed of fashion patron — deep-pocketed entrepreneurs who enter the industry after making their fortunes elsewhere. Some are finding that the learning curve can be steep.

After she took a stake in the venerable Parisian fashion house Lanvin in 2001, the label became one of the most watched-for names on the Paris catwalk.

But Lanvin needs management focus and funds to grow, and Ms. Wang is finding it hard to divide her time – and money – between publishing Taiwan’s United Daily News Group and managing the fashion business. Barely profitable, Lanvin still hasn’t opened a store in the U.S., for example
“I’ve invested plenty. Now we need to develop,” Ms. Wang said in an interview in Paris, days before the Lanvin fashion show this Sunday.

Ms. Wang is among the many entrepreneurs from outside the fashion business who have bought into one of the world’s most high-margin industries and are trying to adjust to a business whose success lies in the careful balance between finance and creativity.

Though she is chairwoman of Lanvin, Ms. Wang spends only 20% of her time on the fashion house, with the rest focused on her publishing businesses.

“I don’t bother people” at Lanvin, she said. In particular, she noted that she tries to leave all creative decisions to Alber Elbaz, Lanvin’s highly acclaimed designer.

But Ms. Wang, who declines to give her precise age but says she was born in the “Year of the Snake,” or 1941-42, says her love of fashion dates to a sewing class taken when she was 17 years old. She says she sometimes can’t resist reminding Mr. Elbaz to look beyond the lanky models who wear his designs on the runway.

“Any woman over 40 has extra flesh here and here. I never hesitate to say to Alber, ‘Think of older women!'” she exclaimed, grabbing her upper arm and her midsection.

Recently, Ms. Wang convinced Mr. Elbaz to put the Lanvin logo — a mother-and- daughter in dresses shaped like a sail, on handbags. Ms. Wang thought the purses with the company’s insignia would appeal to customers in Asia and in the U.S., where goods with logos are more popular than in Europe.

Other newcomers to fashion also are struggling to find their way. The Florida-based Falic Group, a family-run investment company that bought Christian Lacroix from LVMH Moët Hennessy Louis Vuitton in 2005, is primarily an operator of duty-free chains around the U.S. It has yet to make the French fashion house profitable. Now that Lacroix needs to open more stores to drive sales, the Falic family is looking for another investor to help share the burden.

Silicon Valley entrepreneur Asim Abdullah, who built his fortune on developing business-to-business software, purchased the unprofitable Emanuel Ungaro business from Italian luxury-goods company Salvatore Ferragamo SpA in 2005. To run the business, Mr. Abdullah hired veteran luxury-goods executive Mounir Moufarrige, who also took a minority stake in the house.

“I know nothing of Silicon Valley, and Asim knows very little about fashion,” Mr. Moufarrige said in a recent interview, tapping the ash from his Dunhill cigarette into a wooden box. “But it’s fun for him and exciting.”

Owning a fashion house, says Pierre Mallevays, managing partner of Savigny Partners advisory firm in London, “is like owning a piece of art. There is clearly a glamour factor.” But Mr. Mallevays, who is helping Christian Lacroix’s owners look for a new investor, warns that a label can quickly become an “orphan” under inexperienced owners.

Ms. Wang bought a stake in Lanvin from French cosmetics group L’Oreal SA in 2001 and then bought the rest of the company two years later. “I found it difficult to work with other people,” recalls the businesswoman, who wears Chinese collars under her Lanvin dresses.

Under its new owner, the French label’s finances at first suffered. In 2002, for example, Ms. Wang launched a new Lanvin-branded perfume. Instead of entrusting the business to a licensee, as most fashion houses do, Lanvin decided to go solo.

To help finance the launch, Ms. Wang forged a deal with the textile division of Japanese conglomerate Itochu Corp. Itochu paid Lanvin $9 million in exchange for the rights to sell clothes under the Lanvin name in Japan. In exchange, Itochu got a 5% stake in Lanvin from Ms. Wang and also lent the fashion house more than €6 million ($9 million).

The problem with the perfume launch was that Lanvin didn’t have the know-how or a distribution network, so it ended up with millions of euros worth of unsold perfume bottles between 2002 and 2004, according to Lanvin’s 2004 financial records.

Moreover, while the Itochu deal gave Lanvin funds, many in the industry said it was a fashion faux pas. In addition to the main Japanese Lanvin line, Itochu produces and sells a second, less-expensive, line, Lanvin Collection, that analysts say could end up diluting the French brand in one of the world’s most important luxury-goods markets. Itochu reaped $282 million in sales from Lanvin-branded clothes last year, according to an Itochu spokeswoman.

Lanvin’s finances still wobbled, however. In 2004, Lanvin closed four of its subsidiaries and laid off 48 people. Lanvin again banked on its perfume business. In 2004, Interparfums SA, a French perfume manufacturer, paid Lanvin €16 million in addition to royalties for the right to make its fragrances. Two years later, Lanvin was still losing money. In 2006, the company posted a net loss of €14.5 million on €74 million in sales.

Still strapped for cash, Lanvin last year sold its perfume business outright to Interparfums for €22 million. That helped Lanvin make a small profit in 2007 on some €100 million in sales, the company says.

Ms. Wang began her career in Taiwan as a reporter for a newspaper owned by her father. “I always got the most scoops, because I knew everybody,” she says. Ms. Wang hopes to make Lanvin a family business, too. She envisions eventually handing off the label to her now-seven-year-old granddaughter.

As Mr. Elbaz’s designs have earned world-wide critical acclaim, several investors have offered to help out the brand financially. A number of them — including Aronsson Group LLC, the private-equity fund created by former Donna Karan chief executive Jeffry Aronsson — approached Lanvin about buying a minority stake.

Some offered as much as €30 million for a minority stake. But Ms. Wang turned them all down.

“I don’t like people who come to speculate on Lanvin,” she said.