PARIS, France — A little over a year after French luxury group Kering SA split with Stella McCartney, arch rival LVMH Moet Hennessy Louis Vuitton has inked a deal with the ethical fashion label.

While the companies won’t disclose full details of the new arrangement until September, LVMH said Stella McCartney will stay as creative director of her namesake brand and retain majority ownership, marking a rare instance where LVMH has been willing to take a minority stake.

The move comes after Stella McCartney bought back Kering's 50 percent stake in her brand last March, ending a 17-year-long partnership. LVMH and Kering have clashed in the past over control of fashion assets, but it's unusual for a label's ownership to pass from one to the other.

Stella McCartney said in a statement that she had received multiple approaches from investors since breaking up with Kering, but "none could match the conversation I had with Bernard Arnault and his son Antoine," referring to the LVMH chairman and his eldest son, who is CEO of Berluti and chairman of Loro Piana, which are both owned by the group.

LVMH said its investment in Stella McCartney is intended to accelerate the global growth of the brand. "We are convinced of the great long-term potential of her house," said Bernard Arnault. Yet the scale of the Stella McCartney label is a drop in the bucket for the group, which posted a record annual revenue of €46 billion in 2018.

Kering does not break out financial performance for its smaller fashion brands, but Stella McCartney is thought to currently generate about €300 million in annual revenue, according to estimates. (The retail value of Stella McCartney products is likely higher thanks to branded collaborations like an activewear collection with Adidas).

That said, the label has been at the forefront of the growing conversation amongst consumers and regulators around sustainable and ethical fashion. McCartney is a life-long vegetarian and a vocal advocate of animal rights. Her brand — which does not use leather, fur or other animal products — is perhaps the most prominent symbol of sustainability in the luxury market.

For many, fashion's efforts to clean up its act aren't happening fast enough. A recent report by the Global Fashion Agenda, Boston Consulting Group and the Sustainable Apparel Coalition found that efforts to reduce fashion's negative social and environmental impact aren't keeping pace with the industry's rapid growth.

It's an area where LVMH has been seen to be lagging Kering, which publishes an annual environmental profit & loss report and is spearheading an initiative mandated by French President Emanuel Macron to rally the industry around sustainability goals. Kering cash cow Gucci publicly renounced the use of animal fur in 2017.

“A decisive factor was that she was the first to put sustainability and ethical issues on the front stage, very early on,” added Arnault, commenting on the Stella McCartney deal. "It emphasizes LVMH Group's commitment to sustainability. LVMH was the first large company in France to create a sustainability department, more than 25 years ago, and Stella will help us further increase awareness on these important topics."

As part of the transaction, McCartney will become a special advisor on sustainability to Arnault and the group's executive committee.

"It's another concrete step that the group is looking at sustainability as structural trend to invest on,” said industry analyst Mario Ortelli. “This is clearly this is not a deal that will change the balance sheet for LVMH.”

The group's previous foray into ethical fashion ended badly. Last summer, LVMH divested from failed made-in-Africa brand Edun, transferring its 49 percent stake back to founders Ali Hewson and Bono after the label ceased operations.

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

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