Forbes

Tory Burch’s Sur­vival Sketch­book

Amid a lux­ury fash­ion apoc­a­lypse, one of the cen­tury’s great­est en­tre­pre­neur­ial re­tail­ers (and one of Amer­ica’s rich­est self-made women) brought us deep in­side the bat­tle to save her brand.

- By Deniz Çam

Amid a lux­ury fash­ion apoc­a­lypse, one of the cen­tury’s great­est en­tre­pre­neur­ial re­tail­ers (and one of Amer­ica’s rich­est self-made women) brought us deep in­side the bat­tle to save her brand.

AF­TER seven long days and sleep­less nights in March, Tory Burch’s im­pec­ca­bly dec­o­rated library in her red-brick home in the Hamp­tons of­fi­cially be­came a war room. Pierre-Yves Rous­sel, her hus­band and the chief ex­ec­u­tive of her epony­mous fash­ion com­pany, claimed the pat­terned green couch. Across from him, Burch—the com­pany chair­man, clad in leg­gings—took the desk by the win­dow over­look­ing their seven acres. The cou­ple barely stepped out­side the room for three weeks.

“One day went into the next, and one week went into the next,” says Burch, who left her Park Av­enue apart­ment with a small suit­case on March 6, think­ing a quar­an­tine would not last long. “I don’t think we had a break for a solid month. It was a very scary time—2008 hap­pened, and we saw our busi­ness change overnight. But this was noth­ing like 2008. This was much, much worse.”

Lux­ury fash­ion is fickle even in the best of times. The coronaviru­s has been an es­pe­cially vir­u­lent pest. Stores around the globe shut down amid stay-at-home reg­u­la­tions. Chi­nese trav­el­ers—whose pur­chases ac­count for some 30% of lux­ury-goods sales in Europe and North Amer­ica—put away their travel bags. J.Crew, Neiman Mar­cus and Brooks Brothers all filed for bank­ruptcy. Rev­enues at Gucci par­ent Ker­ing and LVMH, Rous­sel’s for­mer em­ployer, fell around 40% in the sec­ond quar­ter. Ralph Lau­ren sales tum­bled by two-thirds.

Burch and Rous­sel re­al­ized quickly how dire the situation was. Within weeks, they were clos­ing many of their 315 Tory Burch stores across the globe, fur­lough­ing most of their re­tail em­ploy­ees and shelv­ing ex­pan­sion plans, and cop­ing with a long­time em­ployee’s death from Covid-19. They then be­gan for­mu­lat­ing new plans to make sure Tory Burch LLC didn’t un­ravel.

Through­out this dis­rup­tive mo­ment for the world, for busi­ness and for re­tail, Burch and Rous­sel let Forbes ride along on their eight­month nav­i­ga­tion of this apoc­a­lypse. They’ve had to im­pro­vise, shut­ting stores, rerout­ing sup­plies and re­vamp­ing e-com­merce ef­forts, all in the hope that the busi­ness, which gen­er­ated al­most $1.5 bil­lion in rev­enue in 2019, with a profit mar­gin Forbes es­ti­mated at 11%, could sur­vive. “We didn’t know how we would be able to pivot and be ag­ile,” Burch says. “The un­known was so dif­fi­cult.”

But jump­ing into the un­known also of­fers lessons, both good and bad, on how to pi­lot through a mon­soon, at a time when shop­pers are wary of leav­ing home and the threat of deadly dis­ease lurks in every pub­lic space.

Burch had a fairy-tale child­hood grow­ing up in a grand old home in Val­ley Forge, Penn­syl­va­nia, the daugh­ter of a for­mer ac­tress and a fi­nancier, both of whom prized dress­ing well. Upon grad­u­at­ing from the Univer­sity of Penn­syl­va­nia in 1988 with a de­gree in art his­tory, Burch moved to New York with a pas­sion for fash­ion. She worked for Zo­ran, a Yu­gosla­vian de­signer who was her mother’s fa­vorite, then had pub­lic-re­la­tions and ed­i­to­rial stints at Harper’s Bazaar, Ralph Lau­ren and Vera Wang. Af­ter she mar­ried in­vestor Chris Burch in 1996, the cou­ple built a port­fo­lio of in­vest­ments that not only helped them fi­nan­cially but also gained them a spot in New York high so­ci­ety.

The first Tory Burch bou­tique opened in Fe­bru­ary 2004 in Man­hat­tan’s Nolita neigh­bor­hood, run by the cou­ple and based on her idea for an af­ford­able lux­ury and life­style brand. In 2005, the day af­ter she ap­peared on Oprah Win­frey’s show, the Tory Burch web­site got 8 mil­lion hits. Re­tail riches fol­lowed: That year, the brand hit $17 mil­lion in rev­enue. Two years later it grew to $113 mil­lion, its gold T logo inch­ing its way onto the ex­clu­sive global list of lux­ury badges.

Then came trou­bles at home. In 2006, Burch ini­ti­ated the end of her mar­riage; the di­vorce was fi­nal­ized two years later. Le­gal trou­ble ar­rived in 2012, when Chris started his own fash­ion com­pany, C. Won­der, which Burch claimed was in­formed too much by the premise of the brand they had launched to­gether. They set­tled in early 2013, when Tory Burch LLC had $800 mil­lion in sales and 54 stores—and Forbes first de­clared her a bil­lion­aire. Chris stepped down as a di­rec­tor and sold most of his 28% stake to new mi­nor­ity in­vestors Gen­eral Atlantic and BDT Cap­i­tal for $650 mil­lion. Burch de­scribes her very pub­lic di­vorce as one of the tough­est pe­ri­ods in her life.

The next year she be­gan dat­ing Rous­sel, who as chief ex­ec­u­tive of LVMH’s fash­ion group over­saw global brands such as Cé­line, Givenchy, Kenzo and Marc Ja­cobs, and was a spe­cial ad­vi­sor to LVMH’s bil­lion­aire founder, Bernard Ar­nault. Burch had met Rous­sel in 2012, when LVMH briefly ex­pressed in­ter­est in in­vest­ing in her com­pany. For about four years, Rous­sel split his time be­tween New York and Paris. The cou­ple wed in De­cem­ber

at Burch’s home in An­tigua, a ren­o­vated es­tate that once be­longed to heiress, hor­ti­cul­tur­ist and fash­ion icon Bunny Mel­lon. “We got mar­ried, we wanted to live to­gether and wanted to be in the same coun­try,” Burch says. So she ap­proached Rous­sel with a plan: What if he be­came the next CEO of Tory Burch? It took a bit of con­vinc­ing, but he agreed. “Even be­fore the pan­demic, work­ing to­gether was a ques­tion mark,” Rous­sel says. “Ob­vi­ously, I come from a dif­fer­ent world, dif­fer­ent cul­ture, dif­fer­ent con­ti­nent.”

“I know [Rous­sel] was very hes­i­tant at the be­gin­ning,” says Vogue editor in chief Anna Win­tour, who over the years built a close re­la­tion­ship with Rous­sel through his work in the in­dus­try. “Work­ing with your wife could be a lit­tle bit chal­leng­ing at times, so he took a lit­tle time to be per­suaded.” Less than two weeks af­ter their wed­ding, Burch an­nounced Rous­sel as the new CEO of her com­pany; he of­fi­cially started in Jan­uary 2019, and she took a more cre­ative role as ex­ec­u­tive chair­man. The new part­ner­ship would soon be put to the test.

The Covid-19 cri­sis ar­rived amid a ca­reer high. Burch, 54, says her 16-year-old busi­ness, with stores in 35 coun­tries, had its best month ever in Jan­uary. Soon af­ter, she de­cided not to do to a run­way show at the Septem­ber 2020 New York Fash­ion Week— an en­deavor that costs mil­lions of dol­lars and that some in the in­dus­try be­lieve to be a waste of money. In­stead, she planned to throw a big block party on Mercer Street in Man­hat­tan, where she would be open­ing a new bou­tique.

On Jan­uary 28, Mc­Don­ald’s and Star­bucks closed some lo­ca­tions in China; that same day, Tory Burch LLC be­gan shut­ter­ing its 29 stores in mainland China, in­clud­ing the 9,600-square-foot store in Shang­hai, its largest in the world. Soon af­ter, shut­down-re­lated de­lays in Asia and Europe be­gan to in­ter­rupt man­u­fac­tur­ing of some Tory Burch prod­ucts.

The first shock hit her sup­ply chain. “You have one thing that comes from Italy, and it’s a but­ton, and then Italy is closed,” Burch ex­plains. “So that but­ton on that sweater pre­vents the whole piece from be­ing able to get made.”

When cer­tain items couldn’t come to­gether due to pro­duc­tion de­lays, her team ei­ther changed their de­sign or got rid of them en­tirely. Among the ca­su­al­ties: two em­broi­dered dresses from In­dia and East­ern Europe and shoes from Italy. In some cases, they reused and repurposed fab­rics in in­ven­tory from pre­vi­ous sea­sons, and moved pro­duc­tion from places hit early by Covid-19, such as Europe and Asia, to Brazil.

Qual­ity prob­lems soon emerged. “Some of the prod­ucts that we got as sam­ples we were not so happy with,” Rous­sel says. So again, they ei­ther killed items or re­designed around the re­main­ing parts. At one point, Burch can­celed an en­tire jew­elry col­lec­tion from Brazil that had run into pro­duc­tion prob­lems and didn’t meet her ap­proval.

Next up: mov­ing in­ven­tory to wher­ever it would sell. Af­ter an­a­lyz­ing real-time data and eval­u­at­ing where stores were re­open­ing and where con­sumer ap­petite was strong­est, Rous­sel had items shipped from the rest of Asia to China, from Europe to the U.S., and from some U.S. re­tail stores to the com­pany’s on­line dis­tri­bu­tion cen­ter in At­lanta. Rous­sel says he re­duced or­ders of sea­sonal prod­ucts and fo­cused on year-round fa­vorites such as bags and sneak­ers.

Sal­vaging the prod­uct was just the first step. Fig­ur­ing out where to sell proved equally vex­ing. As the world locked down, Burch’s huge phys­i­cal foot­print meant it was bleed­ing cash. By midMarch, Burch and Rous­sel had shut more than half of Burch’s 315 stores, in­clud­ing some of the 38 in greater China, 111 in the U.S., six in Can2018

and 13 in Europe. (It had be­gun re­open­ing some stores in China in late Fe­bru­ary.) The com­pany then fur­loughed most U.S. sales staff and the ma­jor­ity of its re­tail per­son­nel in Europe— it won’t say how many of its 5,000 em­ploy­ees world­wide over­all—while con­tin­u­ing to pay for health in­sur­ance for U.S. work­ers. “If you’re not able to pro­tect what you have built,” says Burch of those de­ci­sions, “it be­comes, ob­vi­ously, a very hard, emo­tional jour­ney.”

As with mil­lions of en­trepreneur­s who saw their busi­ness up­ended, the bal­ance be­tween emo­tion and the need for cold logic amid the mael­strom proved a con­stant ten­sion. Rous­sel had built an en­tire growth strat­egy around Asia, with at least 20 new stores planned in China through 2022. As spring turned to sum­mer, the ex­ec­u­tive duo tried might­ily to hold on to the plan, de­fer­ring as many open­ings as pos­si­ble to­ward the end of their time frame, with just two stores opened this year and two more slated for De­cem­ber. “No one’s pre­pared for hav­ing all the stores closed and not know­ing when they’ll re­open,” Rous­sel says. “I think it’s the ul­ti­mate test for a com­pany.”

Sim­i­lar stream­lin­ing fol­lowed with prod­uct se­lec­tion for the 2021 line, which will be 20% smaller (Burch says a culling was al­ready in mo­tion be­fore the pan­demic). Go­ing for­ward, col­lec­tions will in­clude more shoes (the Tory Charm loafer and Tory sneak­ers are this fall’s top sell­ers) and bags, items shop­pers con­sider to be longert­erm buys, or “in­vest­ments,” less likely to go out of style. The prod­uct mix won’t change much oth­er­wise, a spokesper­son says, point­ing out that it was al­ready sell­ing an ar­ray of ca­sual, sporty and more dressy op­tions.

While cus­tomers still mostly grav­i­tate to the brand for its col­or­ful san­dals and tiny hand­bags, Tory Sport, the lux­ury sports­wear col­lec­tion it launched in 2015, has emerged as a bright spot. The com­pany gave the line more prom­i­nent place­ment on its home­page, added a Loungewear Shop to the web­site and in­creased the fre­quency of emails about it. On­line sales of Tory Sport have grown by “more than 30%” since the be­gin­ning of the pan­demic, the com­pany says.

To fin­ish the new, smaller col­lec­tion, Burch had a truck de­liver the partly com­pleted dresses to her home in the Hamp­tons, and shifted her of­fice from the library to the more spa­cious din­ing room. Out went the rugs and the fur­ni­ture, re­placed by glossy fab­ric sam­ples and cloth­ing racks. The lithe fash­ion icon fit­ted her new de­signs on two em­ploy­ees who, she says, were “a lit­tle more fit-model ap­pro­pri­ate” than she is.

Com­pared to the world she knew just a few months ear­lier, it was a sur­real, wrench­ing process, made worse when a friend and co­worker of 14 years suc­cumbed to Covid-19 (Burch wouldn’t share any more de­tails, cit­ing her friend’s pri­vacy). “It was aw­ful,” she says. “It was very hard, and it still is, and it will be for a very long time.”

The pan­demic has proven to be one of great­est ac­cel­er­ants in busi­ness his­tory. As re­tail­ers—big­box stores and mom-and-pop shops alike—are forced to rein­vent them­selves on the fly (see story, page 61), the win­ners have fig­ured out how to im­ple­ment e-com­merce strate­gies to­day that were per­haps on the draw­ing board for five years down the road.

So too at Tory Burch. Shift­ing fo­cus from phys­i­cal stores, Rous­sel repurposed much of that spend­ing to­ward e-com­merce in­fra­struc­ture and on­line cam­paigns, be­gin­ning in China, the Mid­dle East and Ja­pan. Pre-pan­demic, es­pe­cially within Ja­pan’s $31 bil­lion lux­ury mar­ket, on­line pur­chases were largely a non­fac­tor. Lux­ury cus­tomers wanted to see, to touch, to smell their in­dul­gent pur­chases be­fore throw­ing down the credit card.

As the coronaviru­s caused habits to shift, Rous­sel be­gan sell­ing some items on Tmall, Ali­ada

baba’s re­tail site. In lock­step, he re­vamped and ex­panded Burch’s global web­site net­work. In June, he launched sites in Ara­bic and English serv­ing Kuwait, Saudi Ara­bia and the United Arab Emi­rates. There were on­go­ing im­prove­ments and ad­just­ments, as well as new hires in July and Au­gust. All Tory Burch sites, which now num­ber 12, were op­ti­mized for mo­bile while in­cor­po­rat­ing ar­ti­fi­cial in­tel­li­gence to gen­er­ate per­son­al­ized prod­uct rec­om­men­da­tions.

Burch also in­tro­duced vir­tual styling, which en­ables cus­tomers to make pri­vate video ap­point­ments to see dif­fer­ent items in the store. Top clients get even higher touch. In late Au­gust, Burch—who has been ac­tively en­gag­ing with Tory Burch fans on In­sta­gram (she asks them to send her di­rect mes­sages with ideas)—joined 35 cus­tomers on a Zoom call and chat­ted with them about why they love the brand. The com­pany is of­fer­ing more pri­vate ap­point­ments, even out­side nor­mal busi­ness hours, and a styling concierge ser­vice that sends buy­ers a per­sonal pack­age of items to try on at home.

These moves couldn’t come fast enough. As lock­downs be­gan to be lifted around the world, Burch and Rous­sel started re­open­ing stores, bring­ing back most, but not all, fur­loughed em­ploy­ees. By early June, al­most all 315 out­lets were back—but cus­tomers weren’t. Foot traf­fic re­mains down 45%, Burch says. On a re­cent Satur­day af­ter­noon at the Tory Burch store in Man­hat­tan’s Meat­pack­ing District, at what one em­ployee said was the busiest hour of the day, a grand to­tal of three cus­tomers were pe­rus­ing $225 Tory sneak­ers and new $700 Eleanor bags. When cus­tomers do show up, how­ever, Burch says they are younger and more likely to make a pur­chase than the av­er­age pre-Covid cus­tomer.

“I’ve been work­ing pretty se­vere hours for the last 15 years to build a com­pany and do it in a way that re­ally thinks about the long term,” Burch says. “We wanted to be strong, have grace un­der pres­sure, pivot and do what we could to sal­vage our busi­ness, and we did.”

It al­most cer­tainly helped that she had been dis­ci­plined in the past. “[Burch] was very cost­con­scious,” re­calls Brigitte Kleine, the pres­i­dent of Tory Burch from 2005 to 2016. “When you start out that way and keep that as part of your cul­ture, it pays div­i­dends—lit­er­ally and fig­u­ra­tively.”

The numbers of­fer some hope. Data from Sec­ond Mea­sure, a com­pany that an­a­lyzes anonymized credit-card trans­ac­tions from re­tail stores and on­line, re­veal how dire things were in the spring, with Tory Burch’s di­rect U.S. sales down 67% in April year-over-year, and then 41% in May. But those same fig­ures also in­di­cate that Burch and Rous­sel weath­ered the storm: In Au­gust, the year-over-year drop was just 4%. (A spokesper­son for Tory Burch LLC says the Sec­ond Mea­sure numbers are di­rec­tion­ally cor­rect but don’t in­clude pur­chases us­ing cash, Pay­Pal or Ap­ple Pay.) Over­all, Burch and Rous­sel pre­dict that Tory Burch rev­enue will fall by roughly 20% this year, to around $1.2 bil­lion. “Cer­tainly, we’re not where we were,” Burch ad­mits.

Tellingly, nei­ther will say whether Tory Burch is still prof­itable—or how much of a loss it has in­curred. Ac­cord­ing to Rous­sel, the com­pany car­ries “rea­son­able debt.” The sales re­duc­tion, along with lesser val­u­a­tions among pub­licly traded com­peti­tors, has low­ered Forbes’ es­ti­mated value of Burch’s 28.3% stake to $500 mil­lion, down from $800 mil­lion in 2019. We es­ti­mate that Burch, who has roughly a quar­ter-bil­lion dol­lars in other as­sets, in­clud­ing cash and real es­tate, is worth $750 mil­lion, good for No. 26 on Forbes’ list of Amer­ica’s Rich­est Self-Made Women (see page 112). Forbes deemed Burch a bil­lion­aire from 2013 through 2015, be­fore she fell from the ranks as val­u­a­tions of pub­licly traded fash­ion brands dropped.

But she’s still in busi­ness, and the moves she and Rous­sel have made au­gur well for the long term. Rous­sel says the com­pany is more pre­pared for fu­ture shut­downs and will con­tinue to adapt its sup­ply chain as nec­es­sary. While the pan­demic has ac­cel­er­ated broader trends to­ward ca­sual ap­parel, Burch says she still sees women want­ing to dress up and ex­pe­ri­ence joy in tough times. Adds Rous­sel: “We have iconic in­vest­ment prod­ucts, prod­ucts that are time­less. You buy it, you know you can wear it any­time. [That] is how you get out of the cri­sis.” To un­der­score it, Rous­sel and Burch are ex­pand­ing their foot­print again, al­beit more cau­tiously, with plans to open three new stores in Canada as well as one in Aus­tralia and two in China be­fore the end of the year. In early 2021, the com­pany will launch a web­site for cus­tomers in China, and do the same for Hong Kong, Sin­ga­pore, Aus­tralia and Brazil in the sec­ond half of next year.

“Would you buy into Gold­man Sachs on the eve of the fi­nan­cial cri­sis in 2008 or 2009? The an­swer would be no, prob­a­bly not, if you had a crys­tal ball,” says By­ron Trott, founder of in­vest­ment and ad­vi­sory firm BDT Cap­i­tal Part­ners, a mi­nor­ity share­holder. “But go­ing through the pan­demic, go­ing through the cy­cles that have oc­curred in the last eight years of our in­vest­ment, Tory’s busi­ness has been re­ally re­silient from a fi­nan­cial per­spec­tive.”

That re­silience, though, now comes paired with bat­tle-hard­ened per­spec­tive. “If the cri­sis had lasted longer, with all our stores closed, it would have been a dif­fer­ent story, ob­vi­ously,” Rous­sel says. “We’re still in the mid­dle of it, and who knows what’s around the cor­ner.”

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 ??  ?? Curve­ball “[Covid-19] has been a huge learn­ing curve, but it’s been al­most a rein­ven­tion and a re­set as well,” Burch says. “We of­ten say . . . never waste a good cri­sis.”
Curve­ball “[Covid-19] has been a huge learn­ing curve, but it’s been al­most a rein­ven­tion and a re­set as well,” Burch says. “We of­ten say . . . never waste a good cri­sis.”
 ??  ?? Power Cou­ple “Hav­ing [Rous­sel] dur­ing this cri­sis was a god­send for me per­son­ally and for our com­pany as well,” Burch says of her hus­band, who joined Tory Burch LLC as CEO in Jan­uary 2019, shortly af­ter their wed­ding.
Power Cou­ple “Hav­ing [Rous­sel] dur­ing this cri­sis was a god­send for me per­son­ally and for our com­pany as well,” Burch says of her hus­band, who joined Tory Burch LLC as CEO in Jan­uary 2019, shortly af­ter their wed­ding.

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