Hi, and welcome back to Line Sheet. London Fashion Week has begun, but if you’re in Los Angeles for Frieze (or because you live here), please don’t hesitate to stop by Coop on Beverly Boulevard today or tomorrow. Owner Jenna Cooper and many of my friends, including The Only Jane founder Jane Herman and designer Clare Vivier, are hosting a pop-up shop with other L.A.-based fashion brands, from kids’ line Milk Teeth (co-founded by longtime fashion editor Catherine Newell-Hanson) to Jamie Haller. Ten percent of the proceeds will benefit people impacted by the fires.
In today’s oh-so- very-special Inner Circle issue (upgrade here for eternal salvation), I’m sharing everything I know about what’s happening at Saks Global as owner Richard Baker and C.E.O. Marc Metrick aim to, uh, reset how fashion is bought and sold in the U.S. I’ve also got some intel on a quintessential California brand on the block, and a look at how Rothschild became the go-to banker for midsize fashion companies looking to sell. Finally, Sarah Shapiro explains how the new California bill that prevents under-18s from buying certain skincare formulations would be a real pain (and expense) for brands.
🚨🚨 Programming note: Tomorrow on Fashion People, I’m joined by Emilia Wickstead, who shows her new collection on Sunday. (See you there!) We discuss what it’s like to build a business around dressing up in a dressed-down world, why bothering with a fashion show is a worthy endeavor, and why she drinks Athletic Greens. Listen here and here.
Mentioned in this issue: Saks Global, Marc Metrick, Neiman Marcus, Bergdorf Goodman, Richard Baker, Hermès, Bottega Veneta, Gary Wassner, LVMH, Amazon, Luca Solca, Bernard Arnault, Rothschild & Co., the Wertheimers, Chanel, The Row, Jenni Kayne (the brand and person), Richard Kayne, and many more…
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Three Things You Should Know…
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- Everything’s coming up Rothschild & Co.: Last week, after I wrote about Oscar de la Renta, a close Line Sheet reader suggested I examine the rise of Paris-headquartered Rothschild & Co. as the preferred bank for midsize fashion brands—those with low nine figures to $1 billion in annual revenue. Rothschild, which represented Oscar de la Renta in an unsuccessful process last year, worked with Jacquemus on its recently announced sale of a minority stake to L'Oréal. The bank has also advised A.L.C.; Etro; Mayhoola on its sale of a 30 percent stake in Valentino to Kering; and Gianvito Rossi on its sale to Richemont; etcetera. “Rothschild is the new Lazard,” the reader suggested hyperbolically, referring to the publicly traded French investment firm known best in fashion circles for being Bernard Arnault’s go-to bank before LVMH even existed.
Regardless, the boutique has become a fashionable choice among fashion brands. Association is a powerful thing, especially in this industry, and seeing the name pop up in one WWD article after another could compel an owner to call Rothschild when they’re looking to sell. It may also have something to do with Manfredi Corsini, the firm’s co-head of its European consumer practice, who works closely with Sarah Slaoui, managing director of consumer and retail based in New York. The company, which is run by seventh-generation heir Alexandre de Rothschild, was taken private in 2023 through the efforts of several prominent French families, including the Dassaults and Peugeots, the Italian investor Giammaria Giuliani, and yes, the Wertheimers, who own Chanel and now hold a significant stake in The Row. Nice pedigree, indeed.
- Jenni Kayne for sale?: This past week in Los Angeles, there was chatter that Jenni Kayne, the California lifestyle brand founded by the Harvard Westlake grad of the same name, was on the block. A rep for the company said that it’s not true: no inbound queries, no outbound. Why the speculation, then? Not long ago, the brand felt like a sure private equity bet: There were productive stores, a bedding and homegoods line, endless oversize waffle-knit greige sweaters, and revenue at one point crossed $100 million. However, my understanding was that Jenni and her father, private equity guy Richard Kayne, wanted to instead sell their still-very-new skincare line, Oak Essentials, and keep Jenni Kayne as a slow-build lifestyle brand. They’ve raised separate funding for Oak, reflecting that strategy.That said, the world is a very different place than when we reached peak Jenni Kayne aesthetic at the height of the hygge-fied pandemic: Tastes have evolved, customer acquisition costs have grown… and the realities of running such businesses have accumulated. Perhaps someone wants them to sell? Also, remember, nothing is for sale… until it is.
- Read this if your kid is begging to have her birthday party at Sephora: As someone who negotiates weekly with my tween daughter about her skincare routine, I’m tracking a new bill introduced this week by a San Jose assemblyman. After last year’s failed attempt to ban under-13s from purchasing anti-aging products, legislators are proposing a bill that would prohibit retailers from selling retinol products to consumers under 18. (Beauty products containing other ingredients, like alpha hydroxy acid, would also be covered.) If it passes, get ready for “18+ Only” stickers.Just as Prop 65 once forced beauty companies to revise their packaging, this new measure would also upend operations at the national level. Brands might need to create new packaging, or add warning stickers, incurring costs that may be passed to consumers. On the other hand, this will also create interesting segmentation opportunities with more teen-appropriate lines. But with all the challenges facing our kids today, I wonder if regulating their access to glycolic acid and retinol is really where legislators should be focused. —Sarah Shapiro
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And now, on to the main event…
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The Metrick memo that shook the world—and the broken model of multibrand retail that produced it.
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Late Friday afternoon, which just happened to be Valentine’s Day, my phone started buzzing with angry texts about the letter that Saks Global C.E.O. Marc Metrick had just sent to vendors. The memo was straightforward about the company’s attempt to change the way the fashion industry does business in the U.S. In particular, Metrick declared that brands will now be paid within 90 days of shipping products to Saks, Neiman Marcus, or Bergdorf Goodman (its portfolio companies), rather than the customary 30. And while the net-90 policy was worrisome enough to vendors, Metrick also wrote that the company wouldn’t start paying back currently overdue invoices to brand partners until July—and that those payments would be broken down into 12-month installments. (Saks Global, which has raised $2 billion in debt, surely has the cash on hand at the moment, but waiting a few months to start returning funds, and doing so in a drawn-out fashion, will allow the group, it seems, to organize the new payment system and keep spending on things like store renovations and marketing.)
I reckon Metrick sent the note because he felt he had no other choice. The world of multibrand retail has been broken for decades, of course. In the past five years, dozens of department stores or independent boutiques have shuttered (Barneys New York, Opening Ceremony, Need Supply, Bird, MatchesFashion); filed for bankruptcy protection (Neiman Marcus Group); or been sold off (Yoox Net-a-Porter Group to Mytheresa, Farfetch to Coupang, NMG to Saks Global). The Saks–Neiman Marcus Group merger eked through last year, and only after months of uncertainty regarding whether Richard Baker, the retail real estate mogul and its chief architect, would be able to cobble together the financing and avoid an antitrust investigation.
Despite concerns about what might happen to Neiman Marcus and Bergdorf Goodman, two icons of American consumer culture, there was palpable relief when the deal closed. In the diminished retail economy, everyone needs trading partners, and many in the industry sincerely hoped that the consolidation would strengthen Saks and allow the company to start paying vendors on time. The company had been late on payments for what had turned into years, owing many brands hundreds of thousands of dollars, and, in some cases, millions.
The Friday email, which came more than a month after the merger was finalized and new management was put in place, did nothing to assuage concerns. People were outraged, and as I mentioned earlier this week, some brands had already withheld spring merchandise in an effort to force Saks to pay for previous seasons’ goods. Saks responded by calling their bluff—the retailer requested that they ship the new inventory or run the risk of getting dropped altogether from Saks, Neiman Marcus, and Bergdorf Goodman. And many brands took this as an un-veiled threat. While the megaluxury brands, from Louis Vuitton to Prada, stopped relying on department stores years ago, pretty much every other seller of ready-to-wear still has a decent-size wholesale business, often at least 50 percent of overall revenue. For some, Saks, Neiman Marcus, and Bergdorf account for a majority of their sales, and the money they are owed is desperately hurting their cashflow prospects.
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Metrick insisted that this was not a threat, but rather an excruciatingly necessary reorganization required to reset the relationship between brands and retailers. And in some ways, he isn’t wrong: The status quo doesn’t work. Brands often use multibrand retail to shore up their businesses and then, once awareness ascends and EBITDA margins widen, they start opening their own stores. At the same time, retailers have to hold on to products that don’t sell for months (i.e., cold-weather coats shipped in the summer) before marking it down and sending it back to the vendor.
In many ways, this new policy is a stern way of weeding out brands that perhaps aren’t great partners. Indeed, the brand list across Saks, Neiman Marcus, and Bergdorf Goodman is about 3,000 strong and, as Metrick has suggested, should be shrunk by as much as 25 percent. As I reported earlier this week, Gary Wassner, the C.E.O. of Hilldun, which provides loans to brands while they’re waiting for payment from retailers, acknowledged the awfulness of the situation, but also suggested that everyone fall in line. (Of course, Wassner benefits when payments are late because he collects interest on the loans.)
Anyway, everyone is pissed, and Metrick’s plan will only work if he and his team can persuade the majority of brands to comply. I’ve already heard rumors of side deals, including one with LVMH, whose brands will apparently be paid within 30 days. (Saks declined to comment, but companies like LVMH always have preferential deals. When Barneys New York closed, I’ll never forget the Xeroxed signs pinned up throughout the story that listed the brands not part of the liquidation: All of them were LVMH.) As one independent-label C.E.O. posited, Saks is going to have to make dozens of side deals, because otherwise valuable brands will choose to accept the revenue hit and exit Saks Global entirely, even if reluctantly. Some of Saks’s biggest vendors have already moved to the concession model, in which the brand effectively rents space from Saks and forgoes a percentage of sales. (In the traditional wholesale model, Saks owns the inventory outright.) I suspect more will try to finagle similar terms.
Oh, and brands are also not happy about the fact that the company is set to start selling wares on Saks’s new Amazon Luxury shop, which some brands view as akin to Chernobyl. (Remember, Amazon is an investor in Saks Global.)
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Winner-Take-All, or Nobody Wins?
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One frustrated owner I spoke to this week wondered why the focus was on culling the brands when perhaps Metrick and Baker should be working on culling the store footprint. I’ve long believed that, once the F.T.C. cleared this deal, the store fleet would be rationalized. And there were hints of that this week, with the announcement of a store closure in Dallas, where Neiman Marcus was founded.
While there were plenty (okay, a few) of tears shed over the downtown Neiman Marcus store—it was historic, open for more than 100 years, etcetera—the vendor dismissed the sentiment. Greedy landlord or not, nobody shops in downtown Dallas anymore, and that store should have been closed ages ago. This owner hoped that more stores would be closed—they’re too big, and there are too many of them. The department store business has been on the decline since the early 1980s, when specialty retailers took over the suburban mall. Part of managing that decline will be making the business smaller. And yet, Metrick and his team have told brands that they plan to keep as many stores open as possible, as long as they perform.
Metrick himself is sympathetic to vendors’ concerns (no, really) but also convinced that this is the only way to move forward without prompting an actual apocalypse. His thesis that the relationships between the stores and the brands is at the root of the problem is both disturbingly obvious and also quite novel. “It may not be when and how they want, but everyone will be paid what they are owed,” he said in a statement.
For years, Luca Solca, the luxury industry’s star analyst, talked about there being a winner-takes-all in the luxury retail game, with the inevitable consolidation that comes with it. In the end, there was indeed a company that (almost) took it all. But the reality is that there may be no winner.
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The new nugget of reporting in this piece on Arnault’s strategic relationship with President Trump: The LVMH C.E.O. checked in on him after the assassination attempt this summer. After all, they’ve been friends for 40 years! [ WSJ]
John Koryl, former C.E.O. of The RealReal, is joining Meta to run its wearables business. [ Bloomberg]
Am I missing out by not frequenting med spas? Amanda Mull on the latest private equity bait. [ Bloomberg Businessweek]
I had no idea Quince knocked off the Toteme scarf coat! Thank you, Chantal Fernandez. [ The Cut]
On the subject of Quince, Rachel Tashjian ponders the value of cheap cashmere, taking Uniqlo, Naadam, and Quince versions to a lab at FIT to be tested. She lets the reader decide for themselves if these items are worth it. But if you want a cashmere sweater that won’t look “tragic” after a few wears, buy vintage Scottish cashmere. [ WaPo]
Lisa Metcalfe, a brand advisor, has inadvertently launched a second-hand clothing business. If you’re interested in vintage Loro Piana and Ralph Lauren Purple Label, maybe check out her pop-up at the Accessories Council showroom in Manhattan on Friday and Saturday. [ Instagram]
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And finally… Sometimes I really regret not taking anything at the Chanel supermarche show in 2014.
Until tomorrow,
Lauren
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