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MILAN - Cartier owner Richemont has emerged unexpectedly as a serious contender to acquire the Italian luxury shoemaker Gianvito Rossi, potentially beating competition from Renzo Rosso’s OTB, industry and banking sources said this week. It is not clear if Gianvito Rossi’s financial advisers Rothschild & Co have encouraged talks with Richemont to get OTB to pay a higher price, or if the Swiss group will really land a deal, the sources said.

The talks were taking place as Richemont’s biggest fashion brand Chloé announced on Thursday it was parting ways with designer Gabriela Hearst after three years. Miss Tweed was first to report in December that the time had come for the group to find a replacement for her, despite Chloé’s sales being on the rise. The American-Uruguayan designer was proving difficult to work with and finding it hard to strike the right balance between her responsibilities for the French label and her own brand, as well as life in New York.

Richemont’s strategy in fashion is not clear for investors. It is not its core business. The group’s strength is in jewelry and watches and in powerhouses such as Cartier, Van Cleef & Arpels, Vacheron Constantin and IWC. Yet the Swiss group appears to be bent on expanding in fashion and leather goods. In June 2021, it acquired the Belgian leather goods maker Delvaux for €178 million.

“The acquisition is intended to preserve European craftsmanship, grow maison value and strengthen thegroup’s presence in the leather goods sector,” Richemont wrote in its 2022 annual report about Delvaux. Luxury investors will recall that Richemont sold French leather goods maker Lancel in 2018 after 21 years of losses and frustration. Lancel proved a difficult brand to export.

As of Friday, it could not be confirmed whether Richemont was in exclusive talks with Gianvito Rossi. “We know the Swiss group is in advanced talks, but no deal has been agreed yet,” one Milan-based banking source said. It is far from certain whether Richemont will agree on a price and acquire the business or if in the end, as Miss Tweed reported last month, OTB will win the auction. Rothschild & Co, Richemont and OTB declined to comment.

Several sources said Giorgio Armani was also in the race, although its interest is surprising considering the Italian brand has for decades bought only suppliers, not other brands. Gianvito Rossi has rejected expressions of interest from private equity firms. The Italian designer and founder of the eponymous shoe brand wants to partner with a fashion and luxury group that will help it expand worldwide. It wishes to use its expertise, clout and contacts to get prime real estate locations for its stores and obtain discounts when buying advertising.

Gianvito is the son of Italian shoemaker Sergio Rossi, whose brand Kering acquired in 1999 and sold in 2015 after years of losses. Gianvito Rossi made a name for himself by launching his own eponymous brand in 2006. His stilettos, which cost between €600 and €900, are known for being ultra-feminine and comfortable thanks to lightly cushioned insoles, a secret Sergio Rossi passed on to his son.

Gianvito Rossi is understood to be aiming for a valuation of between €350 million and €400 million. Sales are estimated at some €100 million and underlying profitability, or earnings before interest, tax, depreciation and amortization (EBITDA), stands at around 25 percent of revenue, industry sources have said.

Investors often question Richemont’s commitment to fashion. And now they may ask: why would Richemont want to acquire a shoe business? It is a field in which it has little experience and a business that is even more complicated to run than a ready-to-wear or leather goods brand because there can be a substantial quantity of unsold stock because of the variety of sizes and models, and production is not simple.

During its annual results presentation in May, Richemont CEO Jérôme Lambert talked about the group’s “increased ambition in leather goods” and how successful its fashion and leather goods brands had become. It was the first time in years that Richemont spent any time talking about its fashion and leather goods business. Lambert pointed to solid sales growth and improved profitability but stopped short of giving numbers.

Richemont’s fashion and leather goods division, which includes Chloé, Alaïa, Peter Millar, Serapian and Delvaux, feature in the group’s “Other” results section. These brands’ sales and profit figures are combined with real-estate operations and Watchfinder & Co, the lossmaking online second-hand retailer. Lambert would only say that the group’s fashion and luxury brands combined generated a €94 million profit in the year to March 31 “due to higher sales, improved pricing power and strong financial discipline.” However, he did not say how strong the combined sales increase was or what kind of profit he meant: operating profit, net profit or other.

Lambert would only say that Chloé was “on a positive dynamic since the appointment of its creative director Gabriela Hearst in late 2020, with new aesthetics across its product offering.” He added: “Delvaux is enjoying a successful integration into the group in its first full year as part of Richemont and has achieved very sharp growth since acquisition.”

Lambert hinted in the last results presentation that Richemont had big ambitions in fashion and leather goods. Hence, it would not be surprising if the group bought Gianvito Rossi. In May, Lambert described Richemont’s goals in that field: “Over the past year, we have strengthened our teams across the whole organisation, reinforced the agility and flexibility of our operations, accelerated our time-to-market, and managed our inventories effectively. We will remain focused on these priorities, raising the bar for all of them as we progress on our ambition to drive sustainable and profitable growth in the category.”

However, one business Lambert omitted to mention is AZ Factory, the start-up Richemont helped the late Alber Elbaz get off the ground - only to see it orphaned just four months later as the designer passed away due to Covid-19 complications. Miss Tweed reported in December that the future looked uncertain for AZ Factory as key staff from the Elbaz era had left the company. The young fashion brand has been partnering with young designers to design collections, but the model cannot work as wholesalers cannot invest in brands consumers do not get the time to know, Miss Tweed explained late last year. Rupert feels a moral obligation to sustain this business out of respect for the memory of Elbaz, but it’s not clear what its strategy will be going forward nor how long Richemont will finance its losses.

Richemont’s interest in Gianvito Rossi comes as Chloé announced that Gabriela Hearst was leaving. The 2024 spring-summer collection she would present in September would be her last. Relations between Hearst and the Paris Chloé studio had grown tense. The designer was rarely seen in Paris and routinely sent her orders late in the day Paris time, meaning that staff had to work on New York time, which was hardly compatible with family life.

Industry insiders said Hearst behaved like a diva because she did not “really need the salary”.

The 46-year-old designer is married to Austin Hearst, grandson of William Randolph Hearst, the founder of one of America’s biggest media groups. Hearst owns Harper’s Bazaar and Elle, as well as several television channels, newspapers and real estate.

Under her creative leadership, Chloé has become a New Age, rustic, artisanal brand selling pendants with healing stones and square handbags with fringes. Such aesthetics have little to do with the refinement and sophistication embodied by Chloé for so many years, fashion critics say. Founded by Gaby Aghion in 1952 as a new way of expressing women’s new-found freedom, Chloé’s heritage has always been about chic femininity.

Hearst’s aesthetics, influenced by Latin America’s artisanal sensibility, is a world away from the work that designers such as Karl Lagerfeld, Phoebe Philo, Hannah MacGibbon and Clare Waight Keller have done for the brand. Under them, Chloé remained sophisticated and romantic, with a slightly cool 1970s touch. It was never rustic. There were lots of flowing dresses and pastel colors.

“Now with Gabriela, there is no more ‘flou’ (fluid and draped outfits),” said someone who works for Chloé. “There is a lot of tailoring, leather and mesh, but not much silk, organza, chiffon, crepe and other fabrics that Chloé traditionally uses. These fabrics are what give life and movement to clothes. But Gabriela did not want to work with them. As a result, her clothes tend to be stiff and rigid, just like her handbags.”

Richemont said Chloé’s profitability had improved. However, this is rather the result of a cut in expenses such as advertising and marketing than higher sales, industry sources say. Last year, Chloé did not take part in the Hyères fashion festival. Until now, it had been a traditional sponsor of the festival, designed to support young talent. Analysts and industry sources estimate Chloé’s annual revenues are between €450 million and €500 million. Industry sources say Chloé is closing its more accessibly priced See by Chloé line as part of efforts to clarify the brand’s strategy and preserve its high-end image. The fall-winter 2023-2024 collection will be the last. Valentino and Dolce & Gabbana have also closed their second lines to preserve the brand’s perceived exclusivity.

On Thursday, Chloé CEO Riccardo Bellini thanked Hearst for “her unwavering commitment to supporting the maison’s meaningful progression in shaping a more responsible future”. Hearst has worked on the brand’s supply chain, favoring “low impact” fabrics, and putting QR codes on garments to provide consumers with information on the origin of the fabrics used and advice on how to recycle. One of Chloé’s best sellers designed by Hearst is the Nama running shoe made from recycled plastic bottles.“I represent a standard for quality that has no space for compromise,” Hearst said in the company’s statement about her departure.

The designer will focus on her Gabriela Hearst brand, which is estimated to generate around €40 million in annual sales. LVMH, which took a minority stake in her label in 2019, is no doubt pleased about her exit from Chloé as she will now spend more time on her own brand.

Hearst’s departure marks the second time in a row Chloé chooses the wrong person for the job. Before that, it was Natacha Ramsay-Levi who did not fit. In 2017, the French designer succeeded Clare Waight Keller who had quit the brand after falling out with the CEO. “Ramsay-Levi also did not get what Chloé is supposed to be,” one Paris-based head-hunter said. “She was a disciple of Ghesquière (Louis Vuitton’s womenswear designer) who is known for futuristic designs and mixing together different fabrics. Like Hearst, Ramsay-Levi did not do much ‘flou,’ instead a lot of suits, short pants with square boots, and these looks were not very feminine.”

“Chloé needs femininity,” said the CEO of a major online fashion business, adding that its Marcie and Woody bags were among the brand’s best-sellers on his website. Chloé has hired French designer Chemena Kamali to work on the next collections, but it is not clear whether she will succeed Hearst as the brand’s new creative director.

Kamali designed women’s ready-to-wear at Saint Laurent for more than six years under creative director Anthony Vaccarello. Previously, she worked for three years with Waight Keller at Chloé. Earlier this year, she was a consultant for the U.S. brand Frame, industry sources say. Frame did not reply to requests for comment.

Kamali is not as well-known as Hearst, but she has a good reputation for “flou” designs. “She brought femininity to Saint Laurent,” the Paris-based head-hunter said. “She would totally be capable of doing Chloé that’s for sure.” Her studio at Chloé currently has only a handful of people.

Waight Keller, whose style and sensibility fitted well with Chloé, was invited to return, one London-based source who advises her told Miss Tweed on condition of anonymity. “But she was so badly treated that she did not want to go back,” the source said. “She felt she did not get the support of the group when she left.”

Richemont is currently trying out Kamali and could bring in someone else to lead the design studio and work with her. What the future holds for Chloé from the design and performance viewpoints is not clear.