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A Lifetime Friendship? Jacobs and Duffy Near New Deals With LVMH

Marc Jacobs and Bernard Arnault are near resolution of a contract dispute that would cement the designer as the creative force behind Louis Vuitton.

Marc Jacobs at the Louis Vuitton show in March

Marc Jacobs at the Louis Vuitton show in March.

Photo By WWD Staff

NEW YORK — Marc Jacobs and Bernard Arnault are on the verge of resolving their long-running friction, which at times had thrown the designer’s future as the creative force behind Louis Vuitton into question.

Robert Duffy, president of Marc Jacobs International, said Wednesday that he and Jacobs are likely to sign new employment contracts in a few weeks, although he left open the possibility that things could change. Speaking from Jacobs’ offices in Paris, where negotiations are ongoing, Duffy said his optimism about the future of their relationship with parent company LVMH Moët Hennessy Louis Vuitton was based upon a recent positive show of support by Bernard Arnault, its chairman.

“It’s been a struggle, but we’re hoping for the best,” Duffy said. “Nothing has been finished yet, but the most important thing is that we have Arnault’s commitment to making this work, with the proper investment for infrastructure.”

Jacobs and LVMH officials have been in prolonged discussions since last summer over the designer’s long-term role at Louis Vuitton, where he has made an enormous impact on sales — now surpassing the $3 billion mark — since he took over its artistic direction in 1997. Although Jacobs signed a seven-year contract in 2001 to stay on at Vuitton, rumblings began to surface more than a year ago that he and Duffy were unhappy with the investment that LVMH was, in turn, putting into the Marc Jacobs company, which has estimated sales of $300 million.

Insiders said that, in the wake of Tom Ford’s dramatic departure from LVMH rival Gucci Group, increasing tensions between the camps of Jacobs and Arnault led both sides to begin to reevaluate their relationship.

Duffy would not divulge what aspects of their employment are being discussed in their current contract negotiations, but sources described some of the points:

  • Jacobs and Duffy would cement their partnership with LVMH to guarantee the long-term growth of the Marc Jacobs business, making commitments to remain for what would be the duration of their professional careers.

  • LVMH would make a significant investment in Marc Jacobs’ infrastructure, with Arnault’s personal involvement in accelerating its business plans, which include an aggressive retail rollout, as evidenced by this week’s disclosure that Marc Jacobs has signed a real estate deal to open flagships and retain office space in Los Angeles.
  • Jacobs also would sign a 10-year contract to remain at Louis Vuitton, replacing the current deal that expires in 2008. He is said to be negotiating for additional creative control over advertising and ancillary products, as well as a significant increase in compensation, in terms of salary and stock options.
    LVMH officials declined to comment on the talks on Wednesday.

    If Jacobs and Duffy resolve their differences with LVMH in coming weeks, the deal would conclude a volatile few months for the designer, during which he has been approached by numerous suitors to work his magic on other luxury brands while his company reportedly has been pursued as an acquisition by Lawrence Stroll and Silas Chou. Jacobs also surprised the LVMH brass by publicly discussing their feud in The Wall Street Journal during the kickoff of Louis Vuitton’s 150th yearlong anniversary celebration in February.

    Rumors have continued to dog LVMH recently about its intentions to hold on to certain assets, with Stroll’s name coming up frequently as a suitor for the Jacobs business or as a possible licensee for the Marc by Marc Jacobs lower-priced line. Stroll and Chou bought the Michael Kors business, including LVMH’s share, more than a year ago and are looking to acquire other brands, but Stroll is also said to be hot to get Jacobs to take on a creative role at Asprey, which he and Chou also own through a separate company, A&G Group. The creative director position at Asprey has been vacant since designer Hussein Chalayan left after his contract expired in February.

    Stroll’s interest in Jacobs is said to be so great that Arnault reportedly offered to let Jacobs go if Stroll would be willing to make a deal to also buy Donna Karan International, which LVMH has widely been described as shopping, but unable to sell because of its high price tag. It could not be learned whether Arnault’s offer was a serious one, however.

    Arnault’s endorsement of a business is regarded as a key indicator of its ranking in priority among LVMH’s many divisions, and he has recently singled out the performance of Vuitton and Jacobs. In LVMH’s quarterly report last week, Jacobs’ latest creations for Vuitton, such as the Theda bag and Giant Damier luggage, were described as making a “hugely successful debut.”
  • During a conference call, Patrick Houel, LVMH’s chief financial officer, included Marc Jacobs with Celine, Berluti and Pucci as showing positive sales growth. The four companies also were deemed businesses with strong potential by the group when it announced its fourth-quarter and year-end results in March. Donna Karan, however, was portrayed as a major drain on the fashion and leather goods division’s most recent quarter, as store closures and restructuring continue to impact the bottom line.

    — With contributions from Miles Socha, Paris