What's Her Recipe For French Dressing?

By Geraldine Baum

VITAL STATISTICS

NAME VALERIE HERMANN

CURRENT JOB CEO, YSL

FIRST JOB SUPERVISED SPECIAL PROJECTS AT THE COMITE COLBERT

INSIDE TRACK WENT TO BUSINESS SCHOOL WITH PPR CHAIRMAN FRANC,OIS-HENRI PINAULT

CLAIM TO FAME GUIDING JOHN GALLIANO THROUGH TOUGH TIMES

Salvation, not surprisingly, started with a handbag. "We need a bag," Valerie Hermann announced two weeks after taking over as CEO of Yves Saint Laurent. "We need a good bag, something that will sell."

Carine Roitfeld, editor in chief of French Vogue, told her not to bother. "The Saint Laurent girl doesn't carry a bag," Roitfeld said. "She puts her hands in her pockets." Hermann listened politely to Roitfeld's lecture about that iconic Saint Laurent woman, who wore tuxedos and accessorized with more attitude than jewelry.

But true to character, Hermann stuck with her own vision.

A few weeks later, a pricey half-moon of supple leather named the Muse bag was born. That was June 2005. By the end of summer, it was dangling from the arms of actresses and It girls like Demi Moore and Kate Moss, and by fall the mythic house of Yves Saint Laurent had itself a best seller.

"She didn't follow my advice," Roitfeld chortles, "and at the magazine, my girls still carry her bag. I see it a lot on the street."

Hermann, 44, the mother of three daughters, admits maybe it was just a stroke of luck. "We pushed, pushed, pushed, because for me it was an emergency," explains the French executive, speaking in fluent English. "We could have said, 'Let's wait a year and come back to accessories.' What I learned in fashion is you can't wait for tomorrow."

The house of Saint Laurent has no time to waste. It has been hemorrhaging cash for almost a decade, eroding its fashion credibility for perhaps longer and awaiting, if not salvation, the kind of high-end genius that was there at the creation of the Paris couturier in 1961 and that endured for four decades.

Yves Saint Laurent, along with Pierre Berge, his business partner, dressed a generation of women inventively in pantsuits, peacoats and jewel-colored evening dresses that not only were beautiful but also allowed women to express their sexuality and power.

The founders are retired (although very much looming on Paris' Left Bank), and since 1999 the company has been owned by the Gucci Group, a division of one of France's largest conglomerates, Pinault-Printemps-Redoute (PPR). Managers and designers have come and gone, yet none of them have been able to take on the YSL legacy and create something new--and lucrative.

It is now up to Hermann, and to save the brand, she has decided to change it. Hence the handbag.

Since Hermann's arrival, there have been more handbags and other creative successes: a chunky-heeled shoe, a cropped pant, a much copied tunic. They are all inventions of Stefano Pilati, an Italian designer whom Hermann inherited as a partner and immediately embraced.

Hermann also built her own team, including a new CFO and a specialist in accessories. YSL stores had almost none of those high-margin items in 1999 but are now filled with shoes, bags and jewelry. Accessories bring in about half of the company's revenue. In addition, there are less expensive clothes, which Hermann insists are not a second line, layered into the stores. The friendlier-priced "capsule" collection includes basic pieces like jersey evening dresses and safari jackets that won't crease in the latest YSL bag.

Hermann appears to be spending money to make money. Next year the company plans to begin redesigning its 63 Rive Gauche boutiques, which are deemed too dark. At the same time, she is attempting to raise the company's competitive metabolism by tracking customer reaction. She has experts post-testing YSL advertising campaigns. She frequently calls boutiques herself to check if a YSL spread in the local paper is bringing in shoppers. She also pushes Pilati's latest designs in conversations with fashion journalists.

Marie-Pierre Lannelongue, until recently a senior editor at French Elle, admires Hermann's informal but frank style. "She'll ask, 'Have you seen our new Downtown bag? Could you put the Downtown in Elle? And how are your kids?'" Lannelongue says. "It's part natural and part calculated--and so efficient."

In 2006, Hermann's first full year at YSL, revenues rose 19%, to EUR 194 million, and operating losses fell 24.9%. In the first quarter of this year, revenues are again up--35%--and stock analysts are predicting profitability sooner than was expected.

But profitability is one measure of success. Greatness is another.

Two years after Hermann declared to the trade press that she relished the "challenge" of running a wounded YSL, it remains unclear whether she and Pilati have the magic formula to modernize the fashion house and elevate it to its former glory alongside idolized French brands like Chanel, now a multibillion-euro business. The ascension to such heights is a complex mission. It takes believing that Pilati has the talent and range to give women what they need and think they want and that Hermann has the gift to translate his talent into commercial success.

Hermann and Pilati shy away from the notion that Hermann--a relentless listmaker with a family life in an exclusive Parisian suburb, a country home in Normandy and a job that has her traveling the world--just might be the target customer. "I am not the muse of YSL," she insists. "When Stefano shows me the clothes, I never say, 'I like it, I don't like it.' I say, 'I can sell it, or I can't sell it.'"

But PPR chairman Franc,ois-Henri Pinault, who was a classmate of Hermann's in business school, insists she personifies the brand. He snatched her away from PPR rival LVMH Moet Hennessy Louis Vuitton, where she was running ready-to-wear at Dior, as much for her winning record as for her provenance. "Not only does Valerie have all the professional skills," Pinault says, "but she is the YSL woman. She is French, and YSL is the most French of brands. And being an active woman and by her feminine instincts, she will have ideas come to her."

That said, the charming billionaire is clear about why he gave Hermann full autonomy to run a business as if she, not he, owned it: "She is one of the toughest men of our group."

In the few Google photos of Hermann, she looks every bit the image of the sleek luxury-brand executive: severe and pulled together in a very French-women-don't-dare-get-fat way. But in person, she has an easy manner and is even a bit tousled. In the tearoom of the Plaza Athenee, around the corner from YSL's headquarters, Hermann stands out among the rich European women wearing tight jeans and toting suitcase-size designer bags. Angular and petite, she arrives carrying a miniversion of the patent-leather Downtown bag and unravels herself from an Army green trench coat to reveal a black-and-white checked dirndl skirt and sky-high sandals. Hermann confesses that she often blends her YSL wardrobe with other labels, like Hermes and even Monoprix, France's version of Target.

Friends insist Hermann has become more glamorous in her more public role as CEO, converting from washed-out working mom to sophisticated executive--without going overboard. "Valerie, plain pumps, is now Valerie, stilettos," says Camilla Morton, a writer who works closely with Dior designer John Galliano.

But the promotion has not altered Hermann's strength of character, Morton notes, describing her at Galliano's side in April after his closest collaborator, Stephen Robinson, died suddenly. "She was a rock," Morton says. "But that's Valerie. She is human as much as assertive, a good soul as much as a number cruncher."

It is unclear where that balance of toughness and perspective originates. Hermann hints that it comes from a childhood spent watching her parents, both doctors, deal with the carnage of emergency rooms. Hermann grew up in Concarneau, a fishing port in northern Brittany where car crashes were routine on the rough coastal roads and regularly disrupted the family's evenings. "I was often in the corridors of hospitals for emergencies, and it's funny, but I got used to that sort of activity," she recalls. "Maybe it's why I am so comfortable in fashion, which is so quick and aggressive."

Unlike her older brother and sister, who became doctors, she was drawn early on to an environment of "quality and beauty," Hermann says. She aimed high for l'Ecole des Hautes Etudes Commerciales (HEC), one of Europe's best business schools, but that meant moving to Paris alone at age 16 for a two-year prep course. The girl from the provinces was lonely in the beautiful city and distracted herself on weekends by shopping, she says, "to be out among people."

At HEC, Hermann met many people who would determine her future. Foremost was Jean-Christophe Hermann, her husband, now a telecommunications executive. PPR chief Pinault was also there, and although they were not close, he remembers her as "loyal, hardworking and easy to work with."

After graduation in 1985--fewer than one-third of Hermann's classmates were women--there were three job offers for every student. Hermann turned down an entry-level post at L'Oreal in order to supervise special projects at the Comite Colbert, a luxury-goods trade association. (Maureen Chiquet, Chanel's global CEO, who is the same age as Hermann, started at L'Oreal as a brand manager for hair color.) When a L'Oreal director inquired why Hermann went elsewhere, she told him, "I didn't want to spend my days selling shampoo in the south of France."

"I guess it's good," she recalls his telling her, "that you know what you want."

That focus landed Hermann at the house of eccentric wunderkind Galliano in 1996 and eventually at Dior. "We were le carpe and le lapin," she says, laughing at the French image of the classic odd couple, the fish and the rabbit. "He was the British boy, and I was the French bourgeois girl. But we respected the same values."

They developed a winning partnership--what Hermann describes as a unique connivance or collusion. Joe Boitano, group vice president of Saks Fifth Avenue, watched her guide Galliano through many "difficult moments" before presentations at the store. "Valerie just knew how to get into the trenches with the designer, understanding all his emotional and creative needs, and at the same time say, 'We're going to make this business happen.'"

Many insiders marvel at Hermann's touch for managing high-strung talent. With Galliano, she knew when to challenge and when to back off. So after he showed her samples of shockingly immodest miniskirts and transparent tops, Hermann says, she nudged him into lining them. But after 9/11, when Galliano created a collection in camouflage, Hermann didn't comment--and the public loved it.

"You learn from that," she says. "Next time you have something you don't understand, before saying 'I am not so sure,' you shut up and listen. Yes, you always listen, but you have to be honest with these guys. It is a way of respecting them."

When she left Dior, friends described Galliano as angry. But he has apparently recovered. In a rare public act of conviviality between luxury houses, the designer issued an adoring statement about the CEO of Saint Laurent. "Valerie is an incredible woman to work with, as she is sharp, strong, determined--all the qualities that male company presidents possess, yet at the same time she retains her feminine charms."

Hermann's new partner, Pilati, has come to appreciate those qualities and declares that he and she are alter egos. "I finally work with somebody who really knows what it is to be a designer today," he says. "She understands all the difficulties, all the pressures that I am living with. So she's not just a number person. She understands everything I need to succeed."

Pilati arrived at YSL from Prada seven years ago as an assistant to Tom Ford, the Gucci Group's design czar. In 2004, when Ford departed, Pilati took over at the house of Saint Laurent. Early on, fashion editors left his runway shows disappointed, but more recently they have warmed to his designs and declared him a bona fide talent.

Tall and exuberant, Pilati complains of years of frustration and insecurity at YSL--until Hermann came along to relieve some of his burdens. That his new partner was a woman was an advantage: "A CEO who is your age, who is a man, might be a sort of competition," he says. "I have to be the public image of the house; he couldn't. With Valerie, actually, now I don't have tensions. I have challenges, even when we disagree."

It is apparent that their relationship has been less than placid. They are on the phone several times a day and go over everything together from fabrics to budgets. But he says he can't always cope with her directness. "Sometimes I yell at her," he says. She doesn't yell back. Rather, she displays a coldness that Pilati tries to get past by "opening up and being more charming. I make fun of myself and make her laugh. She has a big sense of humor."

He has learned to trust her concrete advice--for instance, when she urged him to make his designs "less dressy" even though he had been thriving with highly feminine silhouettes like the tulip skirt. She wanted "easier pieces," he says. "I thought it was boring, but I kept trying, and then finally I got it, and she said, 'You got it, and it's great!' So she taught me to be a bit more accessible."

Hermann insists that whatever designs YSL offers, it should--it must--adapt to choices women are making at the moment. "Monsieur Saint Laurent said, 'We are dressing the woman of the street,' meaning a real woman, not a woman who is in the dream of the designer," Hermann says. "If you look at what we are doing today, the girls and the bags [of course, the bags], are still reflective of that. But now women are choosing--choosing many lives--and we must be superaggressive and reactive to those choices."