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 on Thursday when the fashion house bearing his name filed for court protection from creditors.
The voluntary petition, similar to Chapter 11 bankruptcy protection in the US, was filed with the commercial court in Paris, which will decide whether to restructure or liquidate the company.
Although Lacroix’s chief executive, Nicolas Topiol, emphasized that the brand intended to continue operating during the process, the news brought an end to a luxury business model.
Founded in 1987 by Bernard Arnault, chairman and chief executive of LVMH Moet 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 apparel, 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. Arnault sold Lacroix in 2005 to the Falic Group, a business based in Florida known for its Duty Free Americas chain. The Falic brothers sought to refocus the luxury brand at the peak, 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,” 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 last year, Topiol said, adding 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 close to the matter, Lacroix was badly hit in the US, where it had opened two stores in New York and Las Vegas and where buyers had 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 euros (US$14 million) on overall revenues of about 30 million euros.
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. This year, Chanel announced the layoffs of 200 temporary employees.
Versace, an independent Italian house, is in a state of turmoil, announcing that revenue fell 13 percent in the first quarter. The board last 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 that can invest in 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.
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