The Balenciaga – Nicolas Ghesquière divorce: Now what?

There is a reason we do not hear of Creative Director shifts very often in the world of high fashion. Unless there has been an extraordinary occurrence (Raf Simmons appointed by Dior earlier this year due to the Galliano incident) or a designer has come back from a hiatus (Hedi Slimane to Saint Laurent Paris, or Yves Saint Laurent as it was still earlier this year, following some time away from the fashion industry), Creative Directors tend to hold their post for a considerable amount of time.

You see, finding a designer who will a) take such a prominent position (which can be a burden or a trophy) and b) complement and enhance the brand’s personality, image and culture is no easy feat!

Before his politically incorrect spat last year, John Galliano headed the creative force at Christian Dior for fifteen years (since 1996). Marc Jacobs has been at the helm of Louis Vuitton since 1997 (that’s also fifteen years), successfully translating the brand into a modern and polished star label without losing its quintessential heritage which the brand so very heavily relies on.

Christopher Bailey, now Chief Creative Officer of Burberry, was appointed as Creative Director back in 2001. This makes his post just over a decade long – and counting. Hand-picked by the then CEO, Rose Marie Bravo, Christopher was a large part of Project “Resuscitate Burberry” (as I like to call it). Today, largely through an amazing partnership with CEO/superwoman Angela Ahrendts and Christopher’s continuously impeccable designs, Burberry is again amongst the top luxury fashion houses in the world.

This is why, when Nicolas Ghesquière’s decision to leave his much-established position as the Creative Director of Balenciaga was announced earlier this week, the fashion world was left momentarily stunned and frozen (before the Twitterverse did its thing).

Nicolas was appointed as Balenciaga’s Creative Director at the very young age of 25 back in 1997. So in this regard, he is leaving a post that he has held for fifteen years. Though the partnership between Nicolas Ghesquière and Balenciaga is not as high profile as that of Marc Jacobs and Louis Vuitton, in effect, it would be akin to the latter partnership also parting ways.

This is no small event.

Like other long serving Creative Directors, one of the reasons (if not the main reason) they stay on with a fashion house for so long is because the partnership works! This is the main reason why, like many others watching the fashion industry, we are anxiously awaiting the news of Nicolas’ successor. If the new Creative Director does not fit like Cinderella’s glass slipper and maintains the level of design quality that we are so used to seeing from Nicolas, then the house of Balenciaga is headed for trouble. Not only is that bad for the company’s financial bottom line, but it would be bad for us and other fashionistas alike who may see one of our favourite brands go downhill.

From a financial perspective, Nicolas’ departure leaves not only Balenciaga in a precarious position, but it also exposes its parent company, PPR.

Following the announcement this past Monday morning, PPR’s share price took a hit, opening the day at €137.850 and closing at €135.050. Graphically, this was a substantial drop in the space of one trading day! Although the market has now absorbed this news and the share price has bounced back slightly (read: the initial drop was a knee-jerk/paranoia reaction, which is quite a standard market reaction when a significant piece of information becomes public), PPR will need to diligently supervise the appointment of this new Creative Director.

The reason for this is that although the net profit line for Balenciaga is nothing compared to PPR’s key performers (Gucci and Saint Laurent Paris), Balenciaga’s affiliation with star power such as Nicolas Ghesquière’s close friend Kristen Stewart, is not to be underestimated. Marketing 101 and Accounting 101 would teach you (not that I will be playing teacher any time soon) that the value of a company, and hence its price per share, can be derived from things such as brand value. Apologies to all those who are anti K-Stew out there, but unfortunately the girl does provide some cred!

Bottom line is that to take away this source of brand value from Balenciaga would also decrease its company value, and in turn may permanently decrease PPR’s net value if the replacement doesn’t cut it.

What may possibly make matters a little worse is if the poaching rumours regarding Monsieur Ghesquière producing his own label under the LVMH group materialises; as PPR’s direct competitor amongst the luxury giants, this would almost certainly decrease PPR’s relative attractiveness for any potential investors out there.

Doom and gloom aside, this change really could be a good thing for Balenciaga.

In 1997, Nicolas was promoted into Creative Directorship on the back of a few lack lustre collections which had left the brand with no distinct identity within the luxury market. The past fifteen years are proof that should the correct designer fill the spot, the house of Balenciaga could be elevated even higher.

That said, Nicolas has definitely left big shoes to fill. I was asked the other day by a dear friend: “What has Nicolas done in the past that has been considered BAD? dressed or styled someone in a ridiculous manner?”

Truth be told, I actually can’t remember. I think that in itself speaks volumes and is testament to the creative gap that will be left in Balenciaga.

Over the past fifteen years Nicolas Ghesquière has worked hard at the helm of Balenciaga, building up a lukewarm, hardly recognised brand to a slick and edgy household name within the fashion and luxury industry. I personally am crossing all my fingers and toes that one of my favourite fashion houses, from whom I regularly (too often) covet pieces, will be able to find a suitable new Creative Director.

For now, we shall play the “Where will he go-Where will he fit in” game?

By Heidy Suwidji – a financial accounting analyst and all-round fashionholic, you can catch her keeping one keen eye on the latest fashionably corporate news, and the other on her favourite online shopping sites. Follow her on Twitter at @lolaswij.