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Following Mass Layoffs, Diane von Furstenberg Faces an Uncertain Future

As the company refocuses its prospects on China amid the pandemic, more than 75 percent of the 400-person staff has been let go, while 18 out of 19 stores are closing. But the contemporary brand's business model was challenged long before Covid-19.
Diane Von Furstenberg walking the runway at a fashion show on February 15, 2015. | Source: Shutterstock
By
  • Chavie Lieber
BoF PROFESSIONAL

NEW YORK, United States — After multiple rounds of restructuring and years of declining sales, New York-based label Diane von Furstenberg has laid off most of its team and is shifting its business to a digital-only, China-focused model, BoF has learned.

It's a major setback for a designer who is still, in the eyes of many, synonymous with American fashion, credited with introducing the wrap dress and mentoring generations of young talent. But like so many contemporary brands, DVF has found itself squeezed by fast fashion and the decline of department stores. The coronavirus pandemic, which closed stores and is expected to drive down consumer spending on fashion, was the final blow.

Multiple sources close to the company told BoF that much of the executive team was let go from DVF in early June. Chief Executive Sandra Campos resigned, and Vice President of Production Holliday Hofstatter is no longer at DVF either. This comes on the heels of layoffs in May, where 75 percent of the company’s roughly 400 employees were let go, leaving the team down to a “skeleton crew.” Employees said layoffs were done over Zoom and without any comment from von Furstenberg. Some employees were let go without severance.

The international businesses of DVF in England and France will shutter. (At the end of May, the brand’s British subsidiary, DVF Studio UK, went into administration, the country’s equivalent to Chapter 11.)

DVF will close 18 retail locations, leaving only its store in New York City’s meatpacking district, which von Furstenberg owns. (The additional floors are the company’s office, studio and a live-work space for the designer.) Stores that have been closed because of Covid-19 will reopen soon and begin to liquidate merchandise.

Representatives from DVF declined to comment. Von Furstenberg did not respond to emailed requests for comment.

DVF joins the pileup of fashion brands struggling to recover from the coronavirus pandemic. The global fashion industry is projected to see revenue decline by up to 30 percent this year, according to The Business of Fashion and McKinsey's State of Fashion report coronavirus edition.

Fashion giants such as Gap, Macy's and Tommy Hilfiger and Calvin Klein parent company PVH Corp. have reported losses of about $1 billion each. Retailers including Neiman Marcus and J.C. Penney have filed for bankruptcy, while Brooks Brothers and Ann Taylor parent company Ascena Retail Group are reportedly considering the same.

The DVF brand began in 1972, when von Furstenberg, then married to her first husband, the German aristocrat Prince Egon von Furstenberg, introduced the wrap dress. Von Furstenberg's success embodied the American dream: she was in her 20s and had immigrated to the US when she launched her brand. She even nabbed a cover of Newsweek in 1976.

The 73-year-old designer, in many ways, is synonymous with American fashion. Von Furstenberg was the chairman of the Council of Fashion Designers of America for 13 years and has mentored designers including Alexander Wang. The brand is privately owned and family-run; von Furstenberg sits on the brand's board, as do her husband, Barry Diller, and her children Alex von Furstenberg and Tatiana von Furstenberg.

DVF’s best years were in the early 2000s. Key to its success back then was Paula Sutter, who served as president from 1999 to 2013, and helped DVF develop a second resurgence after its initial boom in the 1970s. Sutter helped the fashion label grow into a fashion lifestyle company, complete with shoes, accessories, and a home goods collection.

But like many fashion brands, DVF was struggling well before Covid-19. Sources said the company generated promising results from its direct-to-consumer e-commerce arm, but that didn’t make up for the high cost of running physical stores — it reduced its number of locations from 32 to 19 over the last two years, some of which were international or franchises. It also had declining sales at department stores.

Campos, the chief executive who resigned last week, was brought on in 2018 from Global Brands Group, where she was co-president of women's apparel, which included brands like Juicy Couture and Herve Leger. She was tasked with revamping the company; she streamlined the business' multiple offices, introduced more affordable products and focused on its direct-to-consumer channel.

With the focus on direct sales, DVF shrunk its wholesale footprint. But it has also lost crucial accounts. It was dropped by Bloomingdale's, and was stocked at fewer stores with Neiman Marcus, Saks Fifth Avenue and Nordstrom. One employee who worked in merchandising said the brand was down to about 10 wholesale accounts in the US, and that many wholesalers did not want to work with the company because the product didn't sell well.

Clothing from the DVF label starts at around $200, but can go all the way up to $1,800, putting the brand in the category of mid-priced fashion labels that have been edged out in recent years by cheaper alternatives from fast fashion and the growing resale market. DVF's designs were never quite distinct enough to hold customers' attention in an increasingly crowded market. Sources said revenue is expected to come in well below $250 million this year, down from a reported $500 million in 2015. DVF had been looking for a buyer and was also considering licensing its brand name.

The decline of the DVF brand is representative of the dangers of wholesale. Even with a founder and brand name as recognizable as von Furstenberg's, fashion designers have long been struggling with cancelled orders, delayed payments, and excess inventory because of their wholesale partnerships. Coronavirus cut deep, with retailers resorting to fire sales in order to generate much-needed cash to pay rent and salaries. Large fashion brands like DVF that have tried to pivot found that expansions over the years had left them with bloated business models that were expensive to finance.

DVF is still developing its business plan, but sources say the company has hired designer Nathan Jenden for the third time. Jenden worked for the company for a decade and was instrumental in DVF's growth. After leaving in 2011, DVF cycled through a few artistic directors until it hired Scottish designer Jonathan Saunders in 2016 as its first chief creative officer. Saunders resigned in 2017, with friction coming from creative differences. Jenden was temporarily hired back to DVF from the Global Brands Group-owned Bebe (where he met Campos) but departed again in 2018.

The company's international wholesale business was performing better than its US one, and so the company plans to keep selling DVF to a few wholesalers in Europe, under a small team in London.

Sources say the company will now mainly focus on wholesaling to stores in China — an effort that will be run by Gabby Hirata, the company’s head of business development for Asia-Pacific. It’s unclear if the company will still be running its e-commerce operations in the US once it sells out of the Spring collection currently on the site.

As a designer and businesswoman, von Furstenberg has reinvented herself many times. Her different business models reflect the fashion industry's trajectory; the fact that she is focusing on China, which was responsible for 38 percent of the global fashion industry's growth over the last decade, indicates that the company might well weather this difficult time.

"Empowering women is something I've always done," she told BoF in 2018. "It's not a marketing tool."

Editor's Note: This story was updated on 16 June, 2020 to reflect that Sanda Campos resigned from DVF, and was not laid off. 

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