January 23, 2018

CEO Talks: Karl Lagerfeld’s Pier Paolo Righi

CEO Talks: Karl Lagerfeld’s Pier Paolo Righi

PARIS — To say that Pier Paolo Righi started 2018 with a bang would be a gross understatement.In the first two weeks of the year, the chief executive officer of Karl Lagerfeld revealed the brand was merging its two men’s wear lines, with a collection unveiled at Pitti Uomo; launching a capsule collection with Sébastien Jondeau, Karl Lagerfeld’s personal assistant and bodyguard; signing a denim license with Italy’s Giada SpA, and releasing a collaboration with model-of-the-moment Kaia Gerber, the daughter of Cindy Crawford.

It’s hardly surprising given the affordable luxury label is on track to post 30 percent revenue growth for the current fiscal year, with no sign of slowing down. Its retail expansion continues apace, with plans to open its first North American standalone store in New York this spring.And the brand, which has a strong following among connected Millennials, keeps adding new categories. Up next is a limited-edition color cosmetics collection with Australian beauty company ModelCo.

In an interview in Lagerfeld’s studio at the company’s office in Paris, where jars of colored pencils are lined up on a vintage Michel Roux-Spitz desk, Righi — a German national who previously worked at Nike — talked to WWD about working with a visionary, catering to Instagram, and the lessons he’s learned from Coca-Cola.

WWD: How did the Karl Lagerfeld brand perform in 2017?
Pier Paolo Righi: For us, 2017 has been an extremely successful year for the brand. In the fiscal year ending in March, we will be closing up more than 30 percent versus last year and, in like-for-like terms, retail sales are up 16 percent compared to last year, which in today’s climate is an amazing result. Going into the new year that we are just about to start now, we are planning again a similar growth as in the last fiscal year, so the plan is again an increase of 30 percent. That’s overall revenue growth without counting the U.S. If I were to count the U.S., the growth would have been even bigger. We started in the U.S. only three years ago. We have a joint venture in the U.S. with G-III Apparel. Basically, in that joint venture, we also have several licenses and are getting a royalty out of that. We made about $80 million in wholesale business in our second year, and we will soon surpass $100 million, so it’s a significant growth year as well in the U.S.

WWD: What were the main factors powering your growth?
P.P.R.: The growth was very much coming from all pillars of the business, whether it was our own and operated stores, which grew very nicely, but also our franchise partners, who have been extremely successful. Also, the license businesses across the board have been performing very well. We have nicely matured. I think we have a clear understanding of who our consumers are and what they resonate with, and have nicely translated this in great collections. We have seen in ready-to-wear an above-average growth in the last few seasons because I think we are, with our ready-to-wear, even closer to our core consumer than before. What has paid off very well for us is what I call the Coca-Cola principle. Basically, if you buy a bottle of Coca-Cola, you know exactly what you’re getting. The taste has been the same worldwide for decades. It says Coca-Cola on the outside, and it’s Coca-Cola inside. It’s a little bit similar with Karl Lagerfeld. What we want to do with the brand is that whenever a consumer buys something or engages with the Karl Lagerfeld brand, that she or he really gets what they see from the outside. That means that we are trying to connect what we do for the brand one-to-one with the designer.

For example, in men’s wear, we work very closely with Sébastien Jondeau, who is one of the people closest to Karl. We’ve got that capsule collection where basically his personal assistant and bodyguard, who is usually in his shadow, comes out of the shadow and curates a collection for us.

Another very credible connection point is our new store design, which is very much derived from Karl’s personal architectural preferences. For example, from the office where we’re sitting right now, we’ve taken elements like the seats and the flooring into the store, together with elements from Karl’s private home or from his studio. So I think a good part of our success is these connection points that very credibly encapsulate in our Karl Lagerfeld bottle what it really defines. It’s not that he has to interpret the DNA of, let’s say, Chanel or Fendi. He just genuinely lives and works the DNA and the attributes of the brand, and I think the consumer realizes that very well, and that has made it very successful in recent years.There is a strong human component, a very strong involvement on his part, giving it his touch and flair and direction. If he loves an artist like Steven Wilson, he expresses it, and we work on a capsule collection with Steven Wilson. So it’s really like artists he likes, places he likes, architecture he likes — all of this translates into the brand very credibly. I would say these are the soft brand factors, but they play a very, very important role, because I think if you want to create a brand and a business credibly, it always depends on a genuine, credible story, and I think we have that.

WWD: You recently announced a new denim license. It seems surprising that, as a brand positioned in the contemporary bracket, you didn’t have one before. What are your hopes for that business?
P.P.R.: If you think about Karl wearing denim basically daily, you would have said OK, we should have a strong denim collection already from the get-go, but you cannot do it all at once. We had to really kind of choose our battles, and honestly, if you want to do denim well, you have to be really an amazing expert at it. And so we took our time to make sure that we could partner with what we considered one of the best experts in the world. If you look at Giada, who have been developing the Jacob Cohen brand over the last decade or even longer, they are amazing product experts — all product produced in Italy in their own factories; great love for detail; amazing skills also to position the brand in the luxury premium segment.We actually felt that they really can crack the code for us and translate what the man stands for in amazing product and position it very well.

For us, the fact that the Giada guys know that premium segment very well gave us great confidence because then we knew, OK, we are not at risk here of going mass. It will still be an affordable luxury positioning…but it’s definitely not the mass positioning of many other denim brands.

WWD: The other big news this year has been the merger of your Karl Lagerfeld and Lagerfeld men’s wear lines. What was the thinking behind that?
P.P.R.: We have had in mind already for the last couple of years that everything we put into developing the Karl Lagerfeld brand — in terms of aspiration, DNA and content — is basically one brand message. And that brand message cannot be diluted over several names, because it is the same brand.

At some point, it was a very clear natural move that there should be only one brand, and it’s the Karl Lagerfeld brand. It gives us the possibility also to translate the stories that the brand has and develops, and that Karl stands for, not only into women’s wear but also into men’s wear. I mentioned earlier Steven Wilson as an example of an artist that Karl liked and wanted to work with. So we did it for women’s wear, but we didn’t dare then to do it for another name. But now with the Karl Lagerfeld brand, you basically put it under one umbrella and can cohesively do it for women’s wear or for men’s wear. That is an important element. At the same time, we have a very connected young Millennial women’s audience that has a very high fashion sensibility, and from a collection aspect, it will also give us the possibility in men’s wear to reach out more to a fashionable audience that is maybe also a little bit younger and sportier, without alienating the customer that we had before, let’s say the more tailored customer. So it’s adding to our opportunities, in essence.

WWD: What was the origin of having a separate Lagerfeld label?
P.P.R.: The origin was basically that when we took over the brand a little more than six years ago, there was already a very successful men’s wear license in place, which was the Lagerfeld license. And if you introduced the brand under a certain name more than 20 years ago, you hesitate initially to break this successful path and say, “OK, I can even make it even more successful if I put it under another brand label.” It took us a few years to gain that confidence that we, as the Karl Lagerfeld brand, have the strength to basically cover both elements, despite what the Lagerfeld brand has been in the past.

I think we needed that first couple of years to be ready for it.

WWD: For the time being, the Sébastien Jondeau capsule is being tested, but is it your hope that it will become a permanent flanker within the men’s collection?
P.P.R.: Well, I’m not excluding it. It’s not that we have set it up necessarily as being a long-term flanker, or a sub-line, or something of that kind. It would be too premature to put a stake in the ground. It’s something right now that Sébastien, Karl himself, and we as a brand had a lot of fun with, and also will have for the next season, definitely, and then we’ll see, you know. I think it’s totally open.

WWD: Your big women’s wear launch of the year is the collaboration with Kaia Gerber. I understand you started talking to her well before her breakout season last September.
P.P.R.: Absolutely.

WWD: How did she pop up on your radar?
P.P.R.: She wasn’t on my radar at all, on my personal radar — which doesn’t mean anything. She was on Karl’s radar, and that is basically how she popped up for the company, because it was about a year ago that Karl said, “Look, I like Kaia’s personality, I like her fashion edge, how she dresses, the way she gets her fashion sensibility across, and if we were to think about collaborating with one of these young up-and-coming personalities, then I would definitely put my bets on her. And you can trust me, in a year’s time, she will be the woman and the model of the moment.” And that is when we engaged with her, which was really when she was 15 years old.

Kaia’s reaction was, “If there is one designer I would love to work with and I would be prepared to do a collection with — and I would be thrilled — it’s Karl Lagerfeld.” So it was a very immediate “yes.” I was lucky enough to see her working live on that collection. I was amazed how a woman of 15 can have such a clear point of view and such a decisive, but nice and genuinely kind, way of getting her fashion sensibility translated into a collection. I’ve got to say, it has been a real pleasure for my whole team, and I know also for Karl, to work with her. She’s such a pro at that age, and such a kind person and so talented, that we couldn’t have wished for better.

WWD: What is the spirit of the collection?
P.P.R.: The general idea was that we bring the two worlds together, the world of the Paris-based designer icon, Karl, and then these young Malibu sporty fashion girls: two distinct, different worlds. But they have their common denominators, and it was very much in Karl’s and Kaia’s mind to find a common denominator. It’s the kind of West Coast girl who can go to an amazing Parisian evening, when being in Paris, as well as going down the boardwalk in Malibu.

WWD: What sort of target consumer do you hope to reach with this collaboration?
P.P.R.: The target consumer is very much our core consumer: it’s a Millennial girl, socially connected, who travels. It’s a woman of the moment. She dares to show off but in a very natural way.

WWD: As usual, Karl Lagerfeld was very prescient about this, because now her career has gone stellar. You must feel very pleased that it’s working out so well in terms of timing.
P.P.R.: Absolutely. I think it shows once again that the best thing I can do in my role is to have jumbo big ears and listen to Karl. It’s really great, because I’m not getting gray hairs wondering if certain things that Karl has in mind can work out, despite the fact that they sometimes appear a little bit out of the box. Actually, the great thing is that they are out of the box, and that’s why they work. The first response we got from retailers about that project is exactly that, that we have really kind of hit the nerve of the moment. We’ve gotten an amazing response in terms of partnering up. We will celebrate that moment also when launching in September from Los Angeles to New York to Paris. We will have several launch events that will bring that idea together of blending Karl’s world with Kaia’s world.

WWD: You’re also planning to open a store in New York. What are you hoping to achieve with that?
P.P.R.: We are looking into a store opening, probably in March. This is an important milestone for us, because it’s the first store in the U.S. It’s the possibility to show the brand in its entirety and important also because it blends for the first time the collection that we do specifically for the U.S. with our European collection. So it will also have other items from Karl’s archives, other connection points with Karl, whether it’s books, sketches. We’re still working out exactly what it will look like, what the character of the store will be, but it will be an amazing reference point for us.

WWD: How much overlap is there between the U.S. and European collections?
P.P.R.: The overall collection inspiration and the design direction come from the European line, then we have a design team for the U.S. that basically then translates it into a very distinct U.S. collection. We are targeting in the U.S. with that specific collection — on top of the audience that we have, which is very much a younger Millennial audience — a bit more of a mature audience. The dress component plays a much more important role.

WWD: In terms of retail expansion, how many stores did you add in 2017? Where does your store count stand?
P.P.R.: Overall, we opened about 10, 11 stores last year. We are at about a hundred stores right now, give or take. In the last four weeks, we opened two stores in China: one at the Beijing Oriental Plaza and the other at the Starlight 68 Plaza in Chongqing. We opened a beautiful store in Vienna in October, then another in Jeddah at the Red Sea Mall. This phase is not a rush in terms of store openings. It’s important to have the right quality of location and quality of stores, but it depends also, because we have great franchise partners. It might be that with these partners on board, we might accelerate also our monobrand portfolio much faster. The next opening is at the Metropolis mall in Moscow in late March, which will be our first women’s store in Russia. Then we have two important openings coming up, because they are also landmark locations in the Middle East: the Mall of the Emirates and Dubai Mall. We are targeting March openings for these two locations also.

WWD: You mentioned earlier a new store concept. What can you tell me about it?
P.P.R.: The store concept we started off with six years ago was very sleek, black and white, cool. We have evolved in terms of giving it a bit more of that warm home feeling of how Karl lives and works. We have really taken literally the inspirations from his personal, private and business habitat and translated it. Our new store format plays a lot with Instagrammable moments and places, so we really have dedicated spaces where you, as a consumer, can clearly connect with that Karl world and make it seen.

WWD: How are your digital operations evolving?
P.P.R.: For us, the whole e-commerce component is super important. We have 4.3 million followers on Instagram, which also shows we have a very connected audience. We doubled our e-commerce business last year and we are planning to go on with the same growth path, so we are continually changing our web site, adapting it to what consumers tell us they need. It has a large communicative component, too, so it’s not a pure commercial web site. It’s really about a web site where the consumer can connect with Karl himself and with Karl’s world.

WWD: How big is e-commerce in terms of your overall revenues?
P.P.R.: It’s still below 10 percent.

WWD: Humor has always been a strong component of your brand image. Is that something you plan to maintain, or will you switch to a more product-centric approach in ready-to-wear?
P.P.R.: I think it will be a bit of both, because if you think of Karl as a person, he is very ironic and he does not take himself too seriously, so therefore it has to continue to be part of the brand one way or another. A certain lightness, joy, playfulness will always be there. The question would be how it is executed. The past seasons have been seasons where the consumer liked it very loud, and there will be seasons where we will be more subtle, so therefore I think it will be very much the way the consumer moves.

WWD: What else is in the pipeline?
P.P.R.: As previously announced, we have a very interesting collaboration coming up with ModelCo for cosmetics, which we launch in May. It’s an Australian company, which actually had an amazingly successful sell-in that exceeded all our expectations. We are looking forward to a very strong launch there, so I think this will be very important.