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Stella McCartney-Kering Break Up Well Underway

BoF has learned that the French luxury group is selling its 50 percent share in the label, with a formal transition process already in motion, according to a source with first-hand knowledge of the matter.
Stella McCartney | Source: Courtesy
By
  • Lauren Sherman

LONDON, United Kingdom — After a 17-year partnership, French luxury group Kering is selling its 50 percent share of Stella McCartney back to the namesake designer, BoF has learned. The public announcement, originally slated for early January, is imminent, according to a source with first-hand knowledge of the discussions.

According to the source, the Stella McCartney HR team is preparing a booklet outlining the details of the separation to answer outstanding questions and ease employee concerns. However, both parties issued a joint statement saying nothing has been confirmed.

“Kering and Ms Stella McCartney have been operating and growing the Stella McCartney brand since 2001 as a 50/50 joint venture. As already stated, as it is customary between stakeholders, there are regular discussions about the future of the partnership," Kering and Stella McCartney said. "Any significant change to the current relationship would be made public at the appropriate time. Any piece of information circulating to this respect can only be considered as speculation.”

To be sure, unravelling the partnership will be a time consuming, expensive process. (McCartney’s father, musician Paul McCartney, has had a role in financing the buy-back from Kering, said the source, though this could not be independently confirmed. A spokesperson for McCartney said her father has never been involved with the business.)

According the source, Kering's brands will be forbidden from hiring Stella McCartney employees during the transition process, which could take as long as two years.London-based retail strategy consulting firm Javelin, part of global advisory firm Accenture, is working with Stella McCartney to reorganise during the transition period, creating a blueprint for the newly independent Stella McCartney business. (Kering is listed as a client on the company's website, alongside other fashion brands including Tommy Hilfiger, Calvin Klein, Net-a-Porter, Jimmy Choo, as well as Kering-owned Puma.)

While Kering and Stella McCartney have acknowledged that there have been separation talks on more than one occasion over their 17-year partnership, the exact reasons for the break, and why it's happening now, are not yet known. The reported split does come at a time when Kering is streamlining its portfolio and focusing its attention on blockbuster brands including Gucci, Saint Laurent and Balenciaga. In early January, the group announced that it would spin off German sportswear brand Puma, inching the parent company further toward becoming a pure luxury player. In the fiscal year ending December 31, 2017, consolidated revenues were €15.5 billion (about $15.2 billion at current exchange), up 27.6 percent on a reported basis. Sales within the luxury group, which excludes Puma, Cobra and skate brand Volcom, were up 27.5 percent on a reported basis.

Stella McCartney first launched as a joint venture with the Gucci Group (once a subsidiary of what is now known as Kering) in 2001. At the time, the Gucci Group was run by chief executive Domenico De Sole and Tom Ford, who designed both Gucci and Yves Saint Laurent. (McCartney arrived from Chloé after a short but well-received stint as creative director.) Alexander McQueen joined the group in 2000.

Over the next two decades, McCartney and Kering built a global brand, driven not only by the designer's exuberant sportswear but also by her commitment to animal-free fashion. McCartney's faux-fur and faux-leather apparel and accessories helped to elevate the materials in the eyes of the consumer, serving as an example for other brands and a resource for Kering's entire portfolio, which now also includes Balenciaga, Christopher Kane and Brioni. In 2016, Stella McCartney published its first environmental profit-and-loss account.

Kering does not break out the revenues of its smaller houses, although in 2015 market sources estimated that Stella McCartney’s annual global sales were somewhere between $150 million and $200 million. However, the annual retail value of Stella McCartney products is likely significantly more thanks to branded collaborations with Procter & Gamble for beauty (including a hit fragrance business), Adidas for activewear and Bendon for lingerie. Her collection with Adidas, first launched in 2004, has become a brand in itself. McCartney then launched menswear in 2016.

As for how Stella McCartney may transform under the founder’s absolute rule, a push to drive more direct sales could be in the cards. In May 2017, the company announced that it would open four new store locations, including a second store in Paris, one in Florence, in one Costa Mesa, California, and a second location in New York City. A year earlier, it also assumed control of store operations of its three Hong Kong stores, which were previously managed by a local partner. The brand’s retail store portfolio currently includes 52 locations, with another store on London's Bond Street on the way.

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