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From Bankruptcy to Billions: Fashion’s Greatest Second (and Third) Acts

From Chanel to Michael Kors, BoF examines companies that failed hard on the way to global success.
(R-L) Michael Kors and Karl Lagerfeld | Source: Shutterstock
  • Lauren Sherman

United Kingdom — In fashion, nothing is permanent. Even when creative directors flee their posts or companies shutter their operations, opportunities for reinvention are often waiting just around the bend. Indeed, some of today's most successful fashion businesses went through years — and sometimes decades — of financial turmoil before achieving the level of global success they enjoy today.


Rise: Gabrielle "Coco" Chanel opened her first store at 21 Rue Cambon in Paris in 1910. By the 1920s, the designer's inimitable and thoroughly modern design point of view made her a fashion force. Her perfume, Chanel No. 5, which was introduced in 1921, made her a globally recognised icon.

Breaking Point: In 1945, in the midst of World War II, Chanel was forced to shutter her couture house, although the company continued to produce fragrance and accessories.


Return: Chanel's second act came in 1954, when she re-established her couture collection, introducing the tweed jacket now so closely associated with the brand. But it wasn't until 1983, when Karl Lagerfeld showed his first collection for the house, that Chanel was ushered into its current era by amplifying its design signatures — including jersey and tweed, chain link straps and the camellia — to the extreme. In 2014, Chanel reported $7.5 billion in revenues, with a net income of $1.4 billion. The company is owned by the secretive Wertheimer family, descendants of Pierre Wertheimer, who financed the marketing and distribution of Chanel No. 5 in the 1920s.


Rise: The designer first entered fashion at the age of 18 in the early 1970s with The People's Place, a store selling fashion inspired by the likes of Jimi Hendrix, The Beatles and The Rolling Stones, in his hometown of Elmira, New York. The concept, which Hilfiger told BoF was launched with just $150, was initially a success and the designer managed to open several locations in college towns across New York State.

Breaking Point: While Hilfiger's youth and ingenuity helped propel The People's Place forward, poor financial planning and overexpansion in the midst of an American recession forced Hilfiger to file for bankruptcy protection in 1977.

Return: By 1985, Hilfiger was back in business operating under his own name and taking on the likes of Ralph Lauren, Calvin Klein and Perry Ellis with his now-famous "hangman campaign;" a billboard that ran in Times Square, cleverly comparing the new label to the leaders of American fashion's menswear guard. In 1989, during another difficult financial period, he partnered with investors Silas Chou and Lawrence Stroll, who backed Hilfiger all the way to an initial public offering in 1992, when it became the first fashion company to be listed on the New York Stock Exchange. By 2000, the company — which had transformed into a street wear favourite — was generating $2 billion a year in sales. While the aughts brought a dip in brand equity, as well as sales, Hilfiger was able to make yet another comeback with a successful repositioning. In 2010, the business was sold to Phillips-Van Heusen Corp (PVH), which also owns Calvin Klein, for $3 billion. In 2015, Tommy Hilfiger accounted for 42 percent, or $3.4 billion, of PVH's total revenue.


Rise: An icon of minimalism, Calvin Klein's business was generating $30 million by 1977, just a decade after its founding. By the 1980s, Calvin Klein was a household name, much in thanks to the designer's memorable and controversial advertising for denim starring then-teen star Brooke Shields, as well as its forays into underwear and home goods.

Breaking Point: Successful, but racked with debt, the company faced bankruptcy in 1992. Klein was bailed out by friend and entertainment industry executive David Geffen, heralding the next era of iconic Calvin Klein advertising starring Kate Moss and Mark Wahlberg.


Return: In 2002 — a decade of ups and downs later — it was reported that Klein and his lifelong business partner, Barry Schwartz, would sell the company to PVH for $400 million in cash, as well as $30 million in stock and up to $300 million in royalties, "linked to revenues over the next 15 years," according to a report by The New York Times. Klein and Schwartz retired in 2003 when the transaction was made final, but the designer's imprint on the brand remains fresh. Most recently, the label — which generated $2.9 billion in annual revenue for PVH in 2015 — hired Belgian designer Raf Simons as its chief creative officer, the first person to hold that position at the company.


Rise: Best known for creating the "New Look" in 1947 — a silhouette that emphasised the waist, which had been neglected during the 1920s and 1930s — Christian Dior passed away just a decade later in 1957, leaving an indelible mark on the house that bears his name. His successor and former assistant, the then 21-year-old Yves Saint Laurent, made a name for himself with the so-called "trapeze" silhouette, but was subsequently dismissed after customers deemed his wares too bohemian.

Breaking Point: Under the watch of designer Marc Bohan, Dior experienced success, but its parent company filed for the French equivalent of bankruptcy protection in 1978, and was once again bankrupt in 1981. In 1984, businessman Bernard Arnault bought parent company Boussac Saint-Frères — which also owned the department store Le Bon Marché — for one franc. Over the next decade, Arnault took time to buy back more than 350 Christian Dior licenses, many of which had been a detriment to the brand's equity.

Return: In 1995, Arnault hired British designer John Galliano to reshape the label into a name to rival that of Chanel's. While the designer's tenure there ended in controversy, Galliano and chief executive Sidney Toledano were able to transform Dior into a multi-billion dollar brand with a robust fragrance and cosmetics division. In 2015, Dior generated €1.8 billion in revenue.


Rise: An '80s club kid with a specific understanding of New York cool, Marc Jacobs sold his Parsons graduate collection of Op-Art sweaters to influential store Charivari in 1984. In 1986, he debuted his first full-fledged ready-to-wear collection and just a year later won the CFDA's Perry Ellis Award for New Fashion Talent, now known as the Swarovski Award.

Breaking Point: In 1989, the rising star and his business partner, Robert Duffy, were hired by Perry Ellis to help revive the already-stagnant brand. However, Jacobs' time at Perry Ellis was stopped short in 1993 when he was dismissed after the runway debut of his now-iconic "grunge" collection. While the designer's Seattle-grunge inspired looks and cartoon t-shirts were copied endlessly by high street brands and beloved by editors, the high-end version did not sell.


Return: By 1997, as Jacobs and Duffy were on the brink of bankruptcy, LVMH chief executive Arnault hired the designer to bring a fashion identity to luggage brand Louis Vuitton and also invested in Jacobs' namesake brand. With the addition of a secondary line, Marc by Marc Jacobs, in the spring of 2001 and a growing cadre of It-bags and It-shoes, Jacobs became a serious player in the apparel and accessories retail game. By the time Jacobs left his post at Louis Vuitton in 2013, his namesake company was generating $1 billion a year in revenue. In 2015, the company announced that it would fold the Marc x Marc collection back into the main line, embarking on yet another era for the designer.


Rise: Mid-century couturier Pierre Balmain made a name for himself dressing the likes of Ava Gardner and Brigitte Bardot. A series of designers led the house after Balmain's death in 1982, most notably Oscar de la Renta, who designed the collection from 1993 to 2002.

Breaking Point: In 2004, two years after De la Renta's departure, the house filed for bankruptcy protection after an investor failed to honour its commitment.

Return: The majority owner at the time, French businessman Alain Hivelin, was able to turn around the business by hiring designer Christophe Decarnin in 2005. Decarnin's sharp-shouldered, embellished styles — which could easily be sold for five figures — were a grand departure from the conservative elegance for which Balmain had been previously known. After Decarnin exited the brand in 2011, Hivelin recruited the then 24-year-old Olivier Rousteing, whose millennial sensibility helped boost sales to a reported €121.5 million in 2015. In 2016, the owners of Balmain, including the heirs of Hivelin — who passed away in 2014 — sold the company for €485 million to Qatari investment firm Mayhoola, which also owns Valentino.


Rise: The Italian fashion house Gucci was established in Florence in 1921 by Guccio Gucci, a saddle maker who thought it wise to sell bags to his horse-riding customers. By the middle of the century, Gucci's jet-set look became a favourite with film stars and wealthy travellers.

Breaking Point: Family disputes in the 1970s and 1980s left the company in disarray, and by 1993 the business was near bankruptcy.

Return: Enter Tom Ford, whose sexy, '70s-inspired designs — backed by president and chief executive Domenico De Sole — catapulted the company into a war with LVMH, who attempted a hostile takeover in 1999. De Sole and Ford enlisted French conglomerate Pinault-Printemps-Redoute (PPR), now known as Kering, as a partner, and in 2001 PPR purchased a controlling stake in the Gucci Group. However, Ford and De Sole left the company in 2003 after a year of failed contract negotiations. After a spate of creative directors, the company appointed Frida Giannini as head designer in 2006. Her eight-year tenure at the house drew heavily — and for a while, successfully — from Ford's aesthetic but eventually grew tired. However, the company has seen a surge in sales by installing longtime behind-the-scenes player Alessandro Michele in 2015, whose dreamy designs have served as an antidote to fashion's long-running minimalist bent. The brand's annual revenue is projected to exceed €4 billion for the first time in 2015, with an ambition to reach €6 billion.


Rise: Michael Kors first began making and selling sportswear out of his mother's home on Long Island when he was still in secondary school, but he officially launched his label in 1981 after earning kudos from the influential Bergdorf Goodman fashion director Dawn Mello (who subsequently hired Tom Ford during a stint at the creative helm of Gucci). His ability to woo the customer by hosting trunk shows throughout the country, but also by designing irresistible, All-American styles inspired by the likes of Jacqueline Kennedy Onassis and Ali MacGraw, earned him the favour of editors and clients alike.

Breaking Point: By the 1990s, Kors' business was in trouble; the company that owned the license for his lower-priced line, Compagnia Internazionale Abbigliamento USA, chose to stop producing it, leaving the designer's revenue stream drastically reduced. He was forced to file for bankruptcy protection in 1993. "The message, as if anyone needed it underlined, is that it is extremely difficult to make money from designer fashion these days," wrote Amy Spindler in the New York Times in 1993.

Return: By 1997, Kors was able to restructure, thanks to an investment by LVMH, where he became creative director of Céline. In 2003, LVMH sold that 33 percent stake to Tommy Hilfiger investors Silas Chou and Lawrence Stroll. A year later, Kors joined the cast of Project Runway, introducing himself, and his brand, to millions of viewers. In 2011, Michael Kors went public, making him a billionaire in return. In 2015, the company generated more than $4.5 billion in net sales.

Related Stories:

Inside Tommy Hilfiger's American Dream
The Business of Being Tom Ford
Reinventing Gucci

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