‘It was a stalemate’: What a split from Kering means for Stella McCartney

“It was a stalemate,” said Ken Morris, retail consultant at Boston Retail Partners. “When both sides have equal control, there’s no tiebreaker, which can be an interesting scenario. Now she has the freedom to do as she pleases.”

The decision to buy back Kering’s stake in the brand comes after years of efforts to differentiate revenue and extend the business beyond women’s ready-to-wear, where it started. Since 2001, Stella McCartney brand has grown into a multi-pronged business, expanding to include handbags and footwear, children’s and menswear collections, an ongoing partnership with Adidas for activewear, an eyewear collection, a line of fragrances and beauty products distributed by Procter & Gamble, and a lingerie line in collaboration with Bendon.

It’s also spent the past year investing more in e-commerce and mobile commerce capabilities, social media and digital advertising spend, according to analysis from L2. Under full ownership, Stella McCartney will also open more stores and focus on direct customer sales, rather than prioritizing wholesale.

The split has been framed as amicable in statements from both McCartney and Kering CEO Francois-Henri Pinault, and McCartney plans to stay on as a board member for the Kering Foundation. But according to a source who has worked closely with both sides of the business, frustrations built up.

“At the beginning of the partnership, Stella McCartney was treated like the redheaded stepchild of the group, with most of the attention going to Gucci and YSL,” said the source. “You can imagine that recently, that’s only gotten worse. I witnessed roadblocks put in front of [the Stella McCartney team] at every turn. That led to enormous frustration — no real progress was happening, and it took a long time to get things done.”

McCartney denied that she’s looking for other independent backers or to go public, but sources said it’s safe to assume that she’ll maintain majority control of the business and keep it private for now. Kering, which saw overall group sales rise by 25 percent to $19 billion in 2017, doesn’t break out individual revenue information for Stella McCartney. However, 2016 profits rose 42.5 percent to $9.8 million, according to documents filed by the company in September. That figure only pertains to U.K. business and global licensing sales, though — not wholesale or standalone store business elsewhere.

Full control also lends itself better to McCartney’s focus on sustainability. The brand has become a leader in fashion’s slow shift to sustainability, having banned the use of animal products in its fabrics since launch. With Kering, McCartney helped establish an environmental profit and losses report, which brands use to track how much of their product is going to waste.

Without Kering, the brand has more control over how far it can push its dedication and investments in sustainability. Stella McCartney has said in the past that she’s playing the long game when it comes to promoting sustainable fashion — something that clashes with the quarter-to-quarter demands of a conglomerate — and has set out a goal to change the way clothing and accessories are produced.

“Responsible manufacturing is not a quick turnaround game,” said Morris. “No major overhaul is. That’s why you’re seeing a company like Nordstrom attempting to go private.”

On stage at the Vogue Forces of Fashion Conference in October, McCartney expressed frustration with fashion’s slow-to-change mentality: “Modernity comes up constantly in conversation — e-commerce, social media, sustainability — but then it leaves the building, and we go back to our old ways.”

With investments in digital sales; a network of wholesale accounts, stores and e-commerce in Europe, the U.S., the Middle East and Asia; as well as a slew of subsidiary licensing businesses, the brand is in a position where it can stand on its own while experimenting in new sustainability ventures. Over the past few years, the brand has invested in sustainable fabrics and materials through a series of partnerships with companies like Bolt Thread, a biotechnology company, and Parley, a company that creates thread from recycled ocean plastic. It also signed onto an official partnership with The RealReal — the first luxury brand to do so — to promote the buying and selling of used fashion.

For its part, Kering has invested in its own company-wide sustainability efforts, including an innovation lab, where research is conducted on sustainable materials, and the Clean by Design initiative, through which it works with factory partners to push them toward more environmentally friendly habits.

But with full control of the brand’s finances under her belt, Stella McCartney can act more nimbly around issues like sustainability, customer experience across in-store and online, and direct sales.

“The fashion world is desperate for change,” said McCartney in October. “We’re in a shift; something is happening, and we’re all feeling it. And we’re embracing it. We’ve never been afraid of change. If I trip and fall on my face, we’re not sorry about it, as long as we’re embracing newness.”