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LVMH has been in on-and-off-talks with Farfetch over the past few months about acquiring the license to manufacture and distribute the fashion brand Off-White, several industry sources said. Founded by former Louis Vuitton menswear creative director Virgil Abloh in 2013, Off-White suffers from underinvestment by Farfetch, which owns the license through its New Guards Group (NGG) unit.

LVMH owns only the trademark name, not the license, and is unhappy about seeing the value of its asset decline. Lossmaking Farfetch has had to shed staff and put many expansion projects on hold to save money, as Miss Tweed reported last month.

LVMH has been complaining about the damage done to Off-White by selling items at a discount, closing boutiques – such as its London flagship this summer – and holding back on marketing and development projects aimed at helping it grow and remain visible, several industry sources said. Farfetch has not opened as many boutiques as it pledged to when it bought the brand’s license in 2019. Initially, the goal was to open 30 stores in three years. In the end, around half of that, or some 15 stores, were opened, industry sources have said.

To save money, Off-White had to cancel its 10-year anniversary show, which it had planned in New York in September in homage to Abloh. Cutting funds to grow Off-White and other brands run by NGG has caused friction with the company’s co-founders, Davide De Giglio and Andrea Grilli, who abruptly left in June. The brand’s last real fashion show was in March.

“LVMH executives have been complaining about how Farfetch and NGG are managing Off-White,” one senior industry source said. “LVMH has sent some of its people to Milan to oversee the management of Off-White, but they are having trouble having some sort of influence on this situation.”

“New Guards has the license of the trademarks for the Off-White brand,” a spokeswoman for Farfetch told Miss Tweed in an email. “This license expires in 2035 and includes the right for either party of opt out of the agreement effective as of January 1, 2026, subject to a notice provision.” Farfetch and LVMH declined to comment on the talks about the Off-White license.

If LVMH wishes to take the license back for free by Jan. 1, 2026, it will need to give notice by end-December 2024, a source with knowledge of the matter said.

MICHAEL BURKE

“There have been discussions between LVMH and NGG about the license for many months now,” one of the sources said, adding that the person leading the talks on the LVMH side was Michael Burke. The 66-year-old executive, who ran Louis Vuitton for a decade, is one of the closest lieutenants of LVMH CEO Bernard Arnault. Burke had a good understanding with Abloh. Burke was the one who appointed him as creative director of Louis Vuitton menswear. He has been involved with many of the tributes paid to Abloh since he passed away two years ago. Burke did not reply to several requests for comment.

Burke is expected to become head of LVMH’s Fashion Group, the unit that includes brands such as Celine and Givenchy. If LVMH acquires the license and owns the whole of Off-White, it is likely that the brand will come under Burke’s supervision and join the Fashion Group.

Some industry sources say you cannot blame Farfetch for underinvesting in Off-White. It has had little incentive to do so since it is likely to lose the license in just over two years. On the other hand, LVMH is worried that if it waits until the end of 2024, Off-White’s image and brand equity will have suffered so much that it may not be worth investing to help it take off again. In January 2026, LVMH “will get a dead body if it waits that long,” one person close to the talks told Miss Tweed on condition of anonymity.

CULTURAL SIGNIFICANCE

Therefore, the question is: how motivated is LVMH to fully own Off-White? The brand has been regarded as one of the most disruptive voices in fashion this past decade with a distinct coolness and authentic message of inclusivity. But what is its growth potential without its star designer and founder? Can it really reach the goal it set in 2020 of €1 billion in revenues by 2030? Abloh died of a rare form of cancer in November 2021 at the age of 41, leaving behind his beloved wife Shannon, with whom he was close since high school, and two small children.

“Abloh was the voice of Off-White and had cultural significance,” one industry insider said. “He could also connect with people and consumers in ways no one could.” Abloh has often been compared to the late Karl Lagerfeld in how prolific he was in coming up with original and striking designs for everything – not only fashion but in other areas as well such as music, electronics, homeware and sports goods. He had a strong point of view and was truly connected with the times, critics say. His creations stood out in their freshness and brightness.

To replace Abloh, Off-White appointed Ibrahim Kamara as the brand’s new art and image director. Under him, the brand’s story will no doubt be different, fashion experts say, and it will take time to spread and be adopted. If Abloh was into baggy and oversize proportions, Kamara has produced closer-to-body silhouettes with quite a bit of tailoring, and a few asymmetric skirts at his last show in Paris in March. However, he preserved the brand’s utilitarian inspiration with an emphasis on buckles and removable harnesses. There were lots of all-black looks ornamented with rows of tiny metallic circles around perforations. Kamara has also focused on a bright blue shade he wants to make synonymous with Off-White.

“Off-White is a very innovative brand in its thinking,” Kamara, 33, told journalists at the Paris show in March, WWD reported. “We’re experimenting, we’re still developing our own codes.”

Born in Sierra Leone and raised in Gambia, Kamara moved to London when he was 16 and graduated from the prestigious Central Saint Martins fashion school. Before joining Off-White, the designer worked with Abloh while he was at Louis Vuitton.

In 2021, Kamara was appointed editor-in-chief of Dazed magazine and previously consulted for many brands including Chanel, Burberry and Marc Jacobs. His shows have been getting positive reviews and his efforts at staying true to the brand’s disruptive free spirit have been applauded by critics. However, the brand has lost momentum in recent months, not only because of underinvestment but also due to consumers’ fading appetite for luxury streetwear in the current inflationary environment. Off-White’s “Out of Office” calf leather sneakers cost €475 and “Jitney” leather bags cost €1,490. When Abloh was alive and was a world superstar, the brand could get away with such prices. It continued to enjoy growth in 2022 as people bought legacy products, the last designed by Abloh. But can it justify such prices now that he is no longer there?

ABLOH’S BRAIN

Hence, it’s not entirely clear if getting the license back is worth the trouble for LVMH. Originally, the group was interested in Abloh, the man and his brain, not the Off-White brand. LVMH bought a 30 percent stake in the IP of Off-White when Abloh started working as creative director for Louis Vuitton menswear in 2018. It raised that holding to 60 percent in July 2021, four months before the designer passed away. Last year, LVMH bought the remaining 40 percent from Abloh’s wife, Shannon. Now LVMH owns 100 percent of the brand’s IP.

Originally, Arnault was keen to invest in Abloh’s brand to use him as an internal creative consultant for the group and get him involved in all sorts of projects. “Additionally, LVMH and Mr. Abloh have agreed to another arrangement to join forces,” the French group said when it announced in 2021 that it owned 60 percent of the brand. “It will leverage together the group’s expertise to launch new brands and partner with existing ones in a variety of sectors beyond the realm of fashion.”

LVMH has developed a habit of buying stakes in the brands of the designers it hires. When Jonathan Anderson became creative director of the group’s Spanish luxury brand Loewe in 2013, the group took a minority stake in his J.W. Anderson brand, which is based in London.

COLLABORATIONS

Off-White is the master of collaborations. It has done more than 100 of them over the past decade and some have been hugely successful, such as its work with U.S. sportwear brand Nike. Last month, Off-White produced a special capsule for Mattel’s Monster High dolls. The collection featured four dolls dressed in edgy Off-White looks. In January this year, it did one with the Chicago Bulls basketball team. It was a tribute to Abloh’s love of basketball and to his home city.

When Farfetch acquired New Guards Group, the deal gave the company an enterprise value of $675 million. The idea was to leverage Farfetch’s marketplace and sell NGG’s brands online. NGG has the license to manufacture and distribute nine fashion brands including Off-White, Palm Angels, Heron Preston and Opening Ceremony. It owns a controlling stake in all of them except Off-White – which is the crown asset, generating around €300 million in sales. NGG has some 70 boutiques and more than 300 points of sale. It pays a royalty of around 10 percent to LVMH on the sales Off-White, industry sources estimate.

Last year, Off-White’s underlying profitability, or Ebitda, was around €100 million. Several industry sources estimate that it would cost around €200 million for LVMH to secure the license earlier than planned, if a deal was concluded in the near future. However, that’s far from certain, several industry sources said. The situation is complex.

First, relations between LVMH and Farfetch have never been particularly cordial, even before this Off-White affair. The group has always refused to let its flagship Dior and Louis Vuitton sell handbags or ready-to-wear on Farfetch’s marketplace, and negotiations between Arnault and Farfetch CEO José Neves have been tough in the past regarding e-concessions on the company’s platform, sources close to the company say.

For Farfetch, NGG without Off-White does not have quite the same aura and weight on the fashion market. That being said, industry sources say Palm Angels has been growing fast and could eventually catch up with Off-White in terms of size.

NGG’s total revenues last year reached more than €620 million. In 2019, many investors and analysts criticized Farfetch for buying NGG, but it turned out that this was actually the only unit generating profits within the company. This year, NGG’s overall sales are forecast to be lower due to the current downturn.

When Richemont publishes results on Friday this week, investors expect the Swiss group to clarify its intentions vis-à-vis Farfetch. Meanwhile, LVMH will be maneuvering to avoid having to “White Off” its investment in the luxury streetwear brand.