IS TH IS THE END FOR MARC JACOBS?
IT WASN’T SO long ago that a Marc Jacobs bag was de rigueur on stylish arms. We swathed ourselves in his Stephen Sprouse-graffiti’d scarves for Louis Vuitton, while celeb friends lined up to appear in his ads, from Winona Ryder to Sofia Coppola.
It seemed the only way was up for the designer, who ended his 16-year tenure as women’s artistic director of Louis Vuitton in order to focus on his namesake brand. LVMH, the majority owner of Marc Jacobs International, revealed that the brand was doing a billion dollars in retail revenue.
But now, it seems the picture couldn’t be more different. All but one of the brand’s boutiques in New York’s West Village have closed. And Business of Fashion reported recently that the London flagship will close, with other European stores to follow suit.
Luxury industry analysts believe that Marc Jacobs’ revenue has gone down significantly, much of it now attributed to outlet store sales and royalty revenue from Coty, which licenses the fragrances. ‘Our estimate for 2016 was $350 million,’ says Mario Ortelli, global head of the luxury goods sector at Bernstein. ‘For 2017 there will be a sharp decrease from this number.’
While the brand did not comment on this story, LVMH has made no secret of the fact that the Marc Jacobs business is in trouble. Bernard Arnault, chairman and chief executive of LVMH, made headlines when he said: ‘I’m more concerned with Marc Jacobs than the US President.’
So what went wrong? Analysts believe it was a mistake to discontinue the Marc by Marc Jacobs collection, given rising demand for accessible luxury goods propelling the likes of Michael Kors. ‘Eliminating Marc by Marc Jacobs has ended up moving the brand to a higher price point than it should,’ says Luca Solca, head of luxury goods at Exane BNP Paribas.
The idea was to roll more affordable pieces into the main line, giving price diversity within the brand. But the repositioning underestimated the love and loyalty of
customers for Marc By Marc – the fun, accessible side of Marc Jacobs. It also proved an expensive and complicated exercise and confused consumers. ‘ The creative department took time to adapt to the new positioning of the brand,’ adds Ortelli. ‘Marc Jacobs incurred big losses and big restructuring costs.’
At the same time, the lustre of the Marc Jacobs main line faded on the red carpet. It was always the brand of choice for cool actresses like Chloë Sevigny and Liv Tyler. But there were far fewer sightings in 2017, although Tracee Ellis Ross was a standout at the Golden Globes recently.
With the store closures, the brand is more dependent on selling through multi-brand retailers, which presents new problems. ‘Losing the ability to connect with shoppers via its own retail store [and] showcase how it wants to portray the brand, is detrimental,’ says Kate Ormrod, lead retail analyst at Globaldata Retail.
The outlook seems bleak, but LVMH insists it is committed to Marc Jacobs. ‘ We have to reduce the cost base. There is no plan B,’ said LVMH chief financial officer Jean-jacques Guiony in April. ‘ We think it is a very promising business [ but] it has proven quite complicated to develop.’
So, how to fix it? ‘Marc Jacobs should reposition at a more accessible level, or risk losing much of its relevance,’ says Solca. But while boosting relevance is critical, it is also costly, warns Ormrod. ‘Reconnecting with shoppers and getting product back on track is imperative, but it will need further investment to do so.’
As for the former hell-raising Jacobs, a native New Yorker whose grandmother told everyone who would listen that he would be the new Calvin Klein, he has been forced to shoot down rumours that he is leaving his brand, telling WWD: ‘I have been in the office every day, night and weekend working away on the collection.’
And while he steers clear of fashion’s social circuit these days, the industry is still rooting for him. His shows still have a mighty creative impact – let’s hope the business can do it justice again soon.