Will Marc Jacobs Step Back From His Namesake Brand?

NEW YORK, United States — The late-May 2017 news that Marc Jacobs chief executive Sebastian Suhl would be exiting the company came as little surprise to industry insiders. After all, it was only in January that Bernard Arnault, longtime champion of the New York designer and chief executive of luxury conglomerate LVMH, majority owner of the brand, had said on an earnings call with investors that he was "more concerned about Marc Jacobs than the US president."

Now, several sources close to the brand — including current and former employees — are saying that Jacobs may step back from his day-to-day design role or leave the business entirely. Two scenarios have emerged: the company could either hire a creative leader under Jacobs who manages the design team so that he is able to relinquish some of his responsibilities or else Jacobs could leave the company altogether. Either way, sources say Jacobs was unhappy with the brand's reorganisation under Suhl.

A spokesperson for Marc Jacobs and LVMH did not respond to request for comment. But while several former and current employees insist that Jacobs' future at the company is still in question, others — including those involved in the ongoing business overhaul — say that Jacobs, frustrated or not, is once again highly engaged in the business and is already “actively building things back up," doggedly working on the Spring 2018 runway collection that will be shown at New York Fashion Week in September. Jacobs is also a meaningful shareholder in the company, which means he has more than his name riding on its future.

Of course, a new CEO may help to shift the course of the business. For months, Suhl’s departure was thought to be imminent, although many believed he would be moved to another role within LVMH, as so often happens when the conglomerate shuffles its top-tier executives.

Instead, after three years at the helm of a brand consolidation experiment gone awry, Suhl is leaving LVMH altogether, replaced by current Kenzo chief executive Eric Marechalle, who is credited with transforming the 47-year-old French fashion house — once wholly reliant on fragrance sales — into a viable advanced contemporary label fuelled by the youthful spirit of co-creative directors (and Opening Ceremony founders) Carol Lim and Humberto Leon.

At Marc Jacobs, Marechalle is facing a similar challenge, although he must also reckon with the brand’s still-relevant namesake, which adds yet another layer of complexity to an already complicated situation.

Sources say Jacobs is encouraged by the arrival of Marechelle. But while Suhl is an easy scapegoat, it's important to remember that Marc Jacobs was already facing trouble — and in the midst of transformation — when he joined the firm in July 2014 from Givenchy. After hiring beloved British designer Luella Bartley and (accessories guru and longtime Marc Jacobs consultant) Katie Hillier to craft a refreshed identity and product offering for the company's second line Marc by Marc Jacobs, the brand was still said to be on track to spin off from its parent company, LVMH, and complete an initial public offering that would put it on par with Michael Kors.

At LVMH’s annual meeting in April 2014, Arnault said the Marc Jacobs business was generating a billion dollars a year in retail revenue. (How that breaks down is unclear, although it’s thought that the majority of that came from fragrance sales made through a partnership with Coty combined with sales of the distributed Marc by Marc Jacobs line.)

However, with several other brands clawing to compete in an increasingly crowded and challenging marketplace, driving growth proved next to impossible.

In 2015, the company shifted strategy yet again, announcing that it was unifying Marc by Marc Jacobs and the main collection under a single brand umbrella, meaning that Hillier and Bartley would exit their posts. Hillier continued to consult on accessories, as she had always done.

Jacobs once again assumed total control of the company's overall brand vision. But it was also around this time that the designer's longtime business partner, Robert Duffy, stepped back from from day-to-day operations, which current and former employees mark as a significant turning point for the brand.

The idea was that Jacobs, who had recently exited his role as Louis Vuitton's artistic director for women’s, would once again have the creative energy to devote to making Marc Jacobs the leading brand in American fashion, this time without Duffy.

However, a series of missteps made this more difficult than anticipated, according to former and current employees. Today, analysts estimate that the restructuring of the business could mean that it is currently worth half of what it was worth at its peak.

That’s because many of the company’s best retail partners drastically reduced their buys when Marc by Marc Jacobs was nixed, even though the revamped ready-to-wear line included a wider range of product and prices. The stores cited confusion among customers as the reason, but hanger appeal was also a problem.

At the same time, the firm’s cash cow — its fragrance partnership with Coty — began to stagnate. In both the second and third quarters of its 2017 fiscal year, Coty stated that the Marc Jacobs fragrance business was in decline, although it remains a priority. "Marc Jacobs is a key brand for us; Marc Jacobs Daisy is a top 10 [performer] worldwide," a spokesperson for Coty told BoF. "We have a strong partnership with the Marc Jacobs brand and ambitious plans in the US and globally."

Coty cited the recent "holistic" digital campaign around Marc Jacobs Daisy, which announced model and influencer Kaia Gerber as the face of the fragrance. The campaign — which incorporated influencer events, organic social coverage and dot-com activations — secured more than 600 million global media impressions, which, Coty said during its fiscal 2017 third quarter earnings call, "translated to exceptional early results for Daisy across our key US retail partners and double digit sell-out growth."

Meanwhile, Marc Jacobs began closing several of its own direct-retail stores, although those closures were attributed to the restructuring of the business.

“The company, in my view, is making a big improvement in its product,” LVMH chief financial officer Jean-Jacques Guiony said during an April 2017 earnings call. “In the meantime, we have to reduce the cost base. There is no plan B. There is no plan C,” he continued. “It will take the time it takes to fix this business, which we think is a very promising business [that] has proven quite complicated to develop, but we are great believers of the future of Marc Jacobs.”

On Wednesday, during LVMH's half-year earnings call, Guiony said that like-for-like business in direct-owned stores was improving. "Overall business is down but in stores we’ve opened business is significantly up," he said. "This is quite limited. The wholesale business is still going down, we are dependent on department stores for the recovery of the business. The situation remains quite difficult but we see first signs of improvement in our product offering in the retail business, which is obviously very encouraging."

While the brand is still "loss-making," Guiony added that, "the trajectory is pretty strong and we are not particularly worried."

In any case, both the cosmetic and structural changes to Marc Jacobs dampened morale within the company, but also within the New York fashion industry at large, where many executives, editors and buyers are personal fans of both the brand and Mr Jacobs, who once represented the ultimate in cool and directional fashion.

From his first fragrance campaign — shot by Juergen Teller and starring Sofia Coppola — to his pointy-toe mouse flats and utilitarian Stella handbag, Jacobs helped to define the aesthetic of the early 2000s, a decade after his controversial "grunge" collection for Perry Ellis put him on the global fashion map.

However, it’s been a long while since Jacobs had a hit bag or shoe — or a hit fragrance. Over the past two years, sources say that his day-to-day attendance in the office has been up and down. Some weeks he is there every day, others he is unavailable. Some sources attribute that to the natural cadence of the design process, others say that it is more than that.

While Jacobs' runway shows — particularly the bare-bones, bare-budget Autumn/Winter 2017 effort — continue to garner positive reviews from loyal critics, the company's creative team often lacked a leader. That is why Suhl is said to have attempted to hire a deputy underneath Jacobs; a person who could manage the creatives so that they would not have to rely on his presence in the office. Layoffs in Europe suggested that the brand’s operations would be further centralised in its New York headquarters, although there have been calls for high-level buyouts Stateside as well. (As of now, the design team is in place in New York and there will not be any more major hires.)

Furthermore, employees at LVMH’s headquarters in Paris continue to speculate that Jacobs could exit the company altogether, although senior employees in New York find this scenario both shocking and distressing.

The hope, of course, is that the tides will turn with Marechalle’s arrival. But is it too little, too late? As previously reported by BoF, possible scenarios include a potential sale of the business, although for now the most likely strategy is that Marechalle will work with Coty to revive the fragrance business, build up the cosmetics range — which is part of LVMH-owned Sephora’s suite of brands developed by brand incubator Kendo — and get the product right.

The only certainty is that the fashion industry as a whole is pulling for Marc Jacobs. Both the brand and the man.

Disclosure: LVMH, which owns Marc Jacobs, is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholder’s documentation guaranteeing BoF’s complete editorial independence.

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