Star Designer Quits and Turns $820,000 Into $12.3 Million

(Bloomberg) -- The owner of brands such as Gucci and Balenciaga thought it could pay the king of skinny jeans less than $1 million net for his last year at Saint Laurent. They were wrong.

In designer Hedi Slimane’s lawsuit against the luxury group Kering SA, a French court ruled last week that he had been underpaid by as much as 9.3 million euros ($11.5 million) after taxes for his last year of service. In 2016, the 49-year-old had received net pay of 667,000 euros even after sales at Kering’s Yves Saint Laurent SAS division roughly tripled during the four years he was creative director.

The ruling opens a window into the lucrative contracts star designers get for their sought-after input in the fashion industry. At Saint Laurent, Slimane had a clause guaranteeing compensation after taxes of at least 10 million euros a year, mostly through an agreement to buy shares in the company and sell them back at a higher price, according to the March 28 Paris Commercial Court ruling.

Before joining Saint Laurent, Slimane had established his reputation as one of fashion’s most bankable designers during a stint at LVMH’s Dior Homme, where he set the agenda for menswear for more than a decade by bringing back skinny jeans and equally narrow suits. Earlier this year, LVMH said it had rehired Hedi Slimane to succeed the British designer Phoebe Philo as creative director of its Celine label, where he is set to add menswear and couture.

A spokesman for Kering said the company planned to appeal the court’s decision, but declined to comment further. Slimane’s lawyer, Herve Temime, said his client wouldn’t issue a statement on the case.

During four years at the iconic fashion house founded by Yves Saint Laurent, Slimane shortened the brand name to “Saint Laurent,” moved its studio from Paris to Los Angeles, revamped stores with a slick, monochromatic look and line-up of products inspired by rock-and-roll and youth culture. Black-and-white ad campaigns were shot by the designer himself. Lady Gaga was a big fan.

Messy Divorce

But Slimane’s departure from Saint Laurent in 2016 turned into a messy divorce, with Kering and the designer fighting over issues including a 10 million-euro payment for his non-compete clause. The company attempted to waive the clause, but was ordered by a French court to pay up in June 2016. Last December, Slimane lost an an intellectual property case over the use of his photographs in Saint Laurent’s online archive.

Saint Laurent’s sales crossed the 1 billion-euro mark in 2016, with products from Slimane’s tenure like the $3,000 “Sac de Jour” handbag continuing to fly off shelves even as he was replaced by Belgian designer Anthony Vaccarello.

Kering has managed to replicate the turnaround at Saint Laurent at its flagship Gucci as well as at smaller labels like Balenciaga by encouraging designers to impose a unified aesthetic on every aspect of a brand, from store decor to social media accounts.

"We have a new generation of designers who have a more global vision," Chief Financial Officer Jean-Marc Duplaix told reporters on a call in February, when the company reported 2017 sales that roses 27 percent on a comparable basis.

The court setback comes as Paris-based Kering is being investigated by Italian tax authorities at its Gucci division, which accounts for more than two-thirds of group profit.

An investigation by the French website Mediapart claims Gucci underpaid its Italian taxes by at least $1.5 billion by rerouting sales and artificially reassigning executives to a warehouse in Switzerland.

The battle with Slimane isn’t the first time Kering has tangled in court with one of its creative chiefs. In 2014 the company’s Balenciaga division sued its former designer Nicolas Ghesquiere, who had gone on to become womenswear creative director at LVMH’s Louis Vuitton, for making critical remarks about the brand’s management in a fashion magazine.

To contact the reporters on this story: Robert Williams in Paris at rwilliams323@bloomberg.net, Gaspard Sebag in Paris at gsebag@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, Anthony Aarons

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