When Billionaires Need Custom Clothes, Ralph & Russo Are Here
In just 10 years, the London duo has taken a fairy-tale ride to the inner circle of haute couture.
(Bloomberg Businessweek) -- When Prince Harry and Meghan Markle released their engagement photos to the public in 2017, the future Duchess of Sussex’s long-sleeved gown with a sheer top and tulle skirt sparked an instant controversy. It was modern, glamorous, and, at £56,000 ($68,112), incredibly expensive. To the Daily Mirror, it was “racier than what we’re used to.”
But to the low-profile fashion house Ralph & Russo, it was a royal coup. Creative director Tamara Ralph had founded the business in 2010 with then-boyfriend, now-fiancé Michael Russo. A fourth-generation couturier and native of Sydney, she sold her first piece, a skirt, at age 12. Up until Markle, though, the duo had catered to billionaire clients out of a seven-floor, 19th century townhouse in London’s Mayfair district in a rather quiet fashion.
It’s been a quick rise since. In June 2018, Angelina Jolie was photographed attending a service at St. Paul’s Cathedral in London in an ivory couture Ralph & Russo dress and matching fascinator. Last winter, Priyanka Chopra donned a cream-colored silk-crepe couture jumpsuit from the brand in a ceremony before her wedding to pop star Nick Jonas. In less than a decade, the duo has established itself right alongside the elite old guard. Now the brand must grapple with what all independently funded fashion houses must face—how to take on financial backers without losing its identity and individualized focus on the customer.
Day to day, Ralph plays the role of the fairy godmother, winning over clients with lavishly personalized fittings, unusual even in the rarefied world of haute couture. Not many maisons exist where customers still get to sit down at length with the person whose name is on the door. “They’ve taken luxury fashion back to the olden days,” says retail consultant Said Chaarawi. “Like when nobles and royalty would go and sit with the craftsmen and commission a piece of art or a gown.”
Ralph & Russo is the first British brand in almost a century to be accepted as a member of the Chambre Syndicale de la Haute Couture, the French regulatory body that officially deems what is and isn’t haute couture. Twice a year, the brand is invited to show at Paris Haute Couture fashion week with the likes of Chanel (founded 1910), Givenchy (1952), Valentino (1960), and Elie Saab (1982).
The reason for Ralph & Russo’s swelling popularity is straightforward: The goods are gorgeous. Hallmarks include luminous fabrics, elegant flattering shapes like nipped-waist jackets, and decadent yet tasteful embellishments such as crystal-glass beading and rose-gold foiling. Ralph has a dreamy aesthetic that anticipates what her clients want—think diaphanous silk-chiffon gowns and A-line wedding dresses with intricately embroidered bodices. “Couture represents the fairy tale,” she says.
At its most recent show, held in July at the British Embassy in Paris, models floated down the runway in sherbet-hued ruffled-organza frocks and a bejeweled midlength dress featuring tiers of pale pink ostrich feathers. “Fantasy made real,” was how Vogue described it.
But while Ralph & Russo adheres to the painstaking craftsmanship and elite design required for its haute couture distinction, the brand does not strive to be high art. It aims to make clothes that sell.
Stylistically, the designs are accessible for a certain swath of moneyed client. “Tamara’s style is very classic,” Chaarawi, the consultant, says. “It’s not adventurous or cutting-edge. You look at other brands, they’re very artistic. But you see them on the catwalk and you think, How would I wear that? You look at Ralph & Russo’s line—every single thing, you can see yourself wearing.”
Ralph, who studied fashion at the Whitehouse Institute of Design in Melbourne, has an eye for “what a couture client would expect” says Lily Templeton, a fashion writer in Paris. “You want something that screams wealth, that says I had this made to measure, and obviously Tamara has the skills to answer that.” Russo describes the duo’s ethos as “unarrogant” luxury. “We always want our clients to feel welcome.” Ralph goes even further, describing their deep client base, with customers in 58 countries, as an “extended family.”
When starting off, Russo, 38, used his connections as a former banker and consultant with Deutsche Bank AG and Barclays Wealth Management to gain the brand an early foothold in the Middle East, where about 700,000 high-net-worth individuals control $2.6 trillion.
That strategy caught the eye of their first outside investor, British telecommunications billionaire John Caudwell. He became friendly with the couple after meeting them socially and in 2014 acquired a 7% stake for an undisclosed price. He was persuaded to make the investment—his first in the fashion industry—through “a combination of Tamara’s skill as a designer and the couple’s ability to network in the Middle East and win a lot of the Middle Eastern royal families as customers,” he says.
Two of the duo’s six locations are in the Gulf—one in Dubai, one in Doha. Rumored royal devotees include Sheikha Moza bint Nasser al-Misnad, wife of the former Qatari Emir, and Saudi Princess Ameerah al-Taweel, ex-wife of billionaire Prince Alwaleed. Ralph & Russo’s London headquarters is also particularly convenient for wealthy Gulf clientele, many of whom consider the city a second home. They have a second London shop at Harrods, one in Monte Carlo, and another in Paris. Outposts in New York and Miami are in their “immediate plans.” In 2018 the duo began a ready-to-wear line, featuring asymmetric black mini-dresses for $2,000 and $14,500 pleated lamé evening gowns. A custom-designed piece can run more than six figures.
The duo also has expanded into shoes with a line called the Eden, a $2,000 stiletto with ornamental filigree leaves spiraling up the heel, and a line of purses called the Alina. Identifiable by a feather-shaped handle that comes in silver or rose gold, the handbags can be made of mink, calf, or python, and prices can reach more than $9,000. A line of beauty products and fragrances is also in the works.
Ralph & Russo is trying to leverage its cachet with a new investment, potentially valued at $50 million, that will expand its reach. In July, German entrepreneur Lars Windhorst’s Tennor Holding BV took a minority stake in the company, with an option to boost his interest to 40%. The size of the current investment is unclear. Tennor is the only other shareholder alongside Caudwell, the co-founders, and investor Nick Candy’s family office, Candy Capital.
Russo boasted to the Financial Times in 2016 that the company was “a profitable business from the start.” And given the heady prices and stream of clients, you’d think the business would be handsomely profitable. But filings indicate losses soon began to mount as Ralph & Russo grew. The company currently employs 226 artisans, almost four times more than the number at Christian Dior Couture’s ateliers.
Its most recent financials showed sales of £14.3 million ($17.3 million) through the 12 months ended March 2017. Although revenue at the business jumped by 45% from 2016, it had an operating loss of £2.5 million, according to company filings, almost 40% larger than the previous year’s loss. A filing footnote attributed this to “increased promotions and exhibition costs, which will hopefully result in an increase in profitability in the future.” A brand spokeswoman said the company expects to be profitable this year.
It isn’t that unusual for newish, rapidly growing brands to attract big-pocketed investors even as they’re losing money, “especially those that are growing sales online and direct-to-consumer, as they’re seen as having higher growth potential,” says Maxime Boucher, a luxury analyst for Bloomberg Intelligence. He cites two recent examples: LVMH, which acquired a minority stake in Gabriela Hearst in January, and Movado Group Inc., which bought watch startup MVMT in August 2018 just as the Los Angeles-based brand was turning profitable.
The timing is curious, though. The investor Windhorst, 42, was once feted as a wunderkind but has been dogged by several near-flameouts, including a personal bankruptcy and a corporate insolvency. The acquisition of a stake in Ralph & Russo came only weeks after H2O Asset Management LLP, Windhorst’s biggest backer, suffered €8 billion ($8.9 billion) of redemptions because of its investments with the German financier, whose checkered past attracted scrutiny and criticisms.
Windhorst often buys troubled companies for cheap in the hope of restructuring and selling them for a profit. Last year he bought loss-making Italian lingerie brand La Perla.
Tennor made the investment in Ralph & Russo through the bra maker’s parent company, La Perla Fashion Investment BV. And while La Perla Chief Executive Officer Pascal Perrier is joining Ralph & Russo’s board, the two investments “are completely different,” according to Filippos Kodellas, managing director of Tennor’s investment team.
The co-founders say they have not had any discussions with Windhorst—only La Perla executives. Ralph remains optimistic: “It’s crucial to forge partnerships that propel the brand forward.”Even though Markle went with Givenchy for her big day, the buzz around Ralph & Russo has persisted thanks in part to an aggressive social media marketing plan. And the brand still seems to be in the good graces of the monarchy. Last October, Markle’s cousin-in-law Princess Beatrice channeled Jacqueline Onassis in a royal-blue Ralph & Russo dress while serving as maid of honor at the wedding of her sister, Princess Eugenie. This time, even the Daily Mirror approved: “Princess Beatrice stuns,” read the headline. —Additional reporting by Luca Casiraghi and Thomas Beardsworth
--With assistance from Luca Casiraghi and Thomas Beardsworth.
To contact the editor responsible for this story: James Gaddy at jgaddy@bloomberg.net, Chris Rovzar
©2019 Bloomberg L.P.